[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
UNCERTAINTY, INFLATION, REGULATIONS: CHALLENGES FOR AMERICAN
AGRICULTURE
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 28, 2023
__________
Serial No. 118-1
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Agriculture
agriculture.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
52-370 PDF WASHINGTON : 2023
COMMITTEE ON AGRICULTURE
GLENN THOMPSON, Pennsylvania, Chairman
FRANK D. LUCAS, Oklahoma DAVID SCOTT, Georgia, Ranking
AUSTIN SCOTT, Georgia, Vice Minority Member
Chairman JIM COSTA, California
ERIC A. ``RICK'' CRAWFORD, Arkansas JAMES P. McGOVERN, Massachusetts
SCOTT DesJARLAIS, Tennessee ALMA S. ADAMS, North Carolina
DOUG LaMALFA, California ABIGAIL DAVIS SPANBERGER, Virginia
DAVID ROUZER, North Carolina JAHANA HAYES, Connecticut
TRENT KELLY, Mississippi SHONTEL M. BROWN, Ohio
DON BACON, Nebraska SHARICE DAVIDS, Kansas
MIKE BOST, Illinois ELISSA SLOTKIN, Michigan
DUSTY JOHNSON, South Dakota YADIRA CARAVEO, Colorado
JAMES R. BAIRD, Indiana ANDREA SALINAS, Oregon
TRACEY MANN, Kansas MARIE GLUESENKAMP PEREZ,
RANDY FEENSTRA, Iowa Washington
MARY E. MILLER, Illinois DONALD G. DAVIS, North Carolina
BARRY MOORE, Alabama JILL N. TOKUDA, Hawaii
KAT CAMMACK, Florida NIKKI BUDZINSKI, Illinois
BRAD FINSTAD, Minnesota ERIC SORENSEN, Illinois
JOHN W. ROSE, Tennessee GABE VASQUEZ, New Mexico
RONNY JACKSON, Texas JASMINE CROCKETT, Texas
MARCUS J. MOLINARO, New York JONATHAN L. JACKSON, Illinois
MONICA De La CRUZ, Texas GREG CASAR, Texas
NICHOLAS A. LANGWORTHY, New York CHELLIE PINGREE, Maine
JOHN S. DUARTE, California SALUD O. CARBAJAL, California
ZACHARY NUNN, Iowa ANGIE CRAIG, Minnesota
MARK ALFORD, Missouri DARREN SOTO, Florida
DERRICK VAN ORDEN, Wisconsin
LORI CHAVEZ-DeRemer, Oregon
MAX L. MILLER, Ohio
______
Parish Braden, Staff Director
Anne Simmons, Minority Staff Director
(ii)
C O N T E N T S
----------
Page
Finstad, Hon. Brad, a Representative in Congress from Minnesota,
submitted letter............................................... 252
Miller, Hon. Max L., a Representative in Congress from Ohio,
prepared statement............................................. 5
Rose, Hon. John W., a Representative in Congress from Tennessee,
submitted letter............................................... 253
Scott, Hon. David, a Representative in Congress from Georgia,
opening statement.............................................. 4
Thompson, Hon. Glenn, a Representative in Congress from
Pennsylvania, opening statement................................ 1
Prepared statement........................................... 3
Submitted statements on behalf of:
Broydrick, Bill, Executive Director, National Rural
Lenders Roundtable..................................... 245
J.R. Simplot Company..................................... 245
Witnesses
Duvall, Vincent ``Zippy'', President, American Farm Bureau
Federation, Washington, D.C.................................... 7
Prepared statement........................................... 8
Friedmann, Peter, Executive Director, Agriculture Transportation
Coalition, Washington, D.C..................................... 15
Prepared statement........................................... 16
Supplementary material....................................... 260
Rosenbusch, Corey, President and Chief Executive Officer, The
Fertilizer Institute, Arlington, VA............................ 19
Prepared statement........................................... 20
Twining, Michael, Vice President of Sales & Marketing, Willard
Agri-Service; Member, Board of Directors, Agricultural
Retailers Association, Worton, MD.............................. 24
Prepared statement........................................... 26
Brown, Mike, President, National Chicken Council, Washington,
D.C............................................................ 34
Prepared statement........................................... 36
Supplementary material....................................... 261
Larew, Robert L., President, National Farmers Union, Washington,
D.C............................................................ 173
Prepared statement........................................... 174
Supplementary material....................................... 268
UNCERTAINTY, INFLATION, REGULATIONS: CHALLENGES FOR AMERICAN
AGRICULTURE
----------
TUESDAY, FEBRUARY 28, 2023
House of Representatives,
Committee on Agriculture,
Washington, D.C.
The Committee met, pursuant to call, at 10:00 a.m., in Room
1300 of the Longworth House Office Building, Hon. Glenn
Thompson [Chairman of the Committee] presiding.
Members present: Thompson, Lucas, Austin Scott of Georgia,
Crawford, LaMalfa, Rouzer, Kelly, Bacon, Johnson, Baird, Mann,
Feenstra, Miller of Illinois, Moore, Cammack, Finstad, Rose,
Jackson of Texas, Molinaro, De La Cruz, Langworthy, Duarte,
Nunn, Alford, Van Orden, Chavez-DeRemer, Miller of Ohio, David
Scott of Georgia, Costa, McGovern, Adams, Spanberger, Hayes,
Brown, Davids of Kansas, Slotkin, Caraveo, Salinas, Perez,
Davis of North Carolina, Tokuda, Budzinski, Sorensen, Vasquez,
Crockett, Jackson of Illinois, Casar, Pingree, Carbajal, Craig,
and Soto.
Staff present: Parish Braden, Caleb Crosswhite, Josh
Maxwell, Patricia Straughn, Trevor White, Erin Wilson, Daniel
Feingold, Prescott Martin III, Ashley Smith, Joshua Tonsager,
Elaine Zhang, Kate Fink, and Dana Sandman.
OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN
CONGRESS FROM PENNSYLVANIA
The Chairman. The Committee will now come to order.
Welcome, everybody, and thank you for joining today's hearing
entitled, Uncertainty, Inflation, Regulations: Challenges for
American Agriculture. After brief opening remarks, Members will
receive testimony from our witnesses today, and then the
hearing will be open to questions.
So once again, good morning, everybody, and welcome to the
first House Committee on Agriculture hearing of the 118th
Congress. Our focus this morning will be on the headwinds
facing production agriculture. Without a comprehensive
understanding of the industry's challenges, we cannot write an
impactful farm bill that addresses the needs of those who grow,
process, and consume the food, fuel, and fiber we are blessed
to produce here in the United States.
As we seek solutions, it is my vision that this Committee
will provide the necessary tools to our farmers and ranchers to
ease the barriers to production felt in recent years. As
Chairman, I challenge each Member of the Agriculture Committee
to view all policies through the lens of science, technology,
and innovation and identify forward-looking solutions
throughout our work.
Our nation's farmers, ranchers, and foresters are
exceptional, having increased food and fiber production nearly
threefold since the 1940s. They have done so with no relative
increase in inputs, serving as shining stars of sustainability
and conservation practices. However, the uncertainty caused by
a global pandemic, geopolitical unrest, and incessant
government intrusion have led to a modest production decline in
recent years. Enduring production agriculture policies are
essential to our national security. Maintaining a safe,
abundant, and affordable domestic food supply is equally
essential, as is meeting the needs of the perennial global food
crisis.
Over the last several years, I have traveled to more than
40 states and I have heard firsthand from our farmers on issues
related to labor, fuel, fertilizer, inflation, and interest
rates. The average cost of diesel fuel per gallon increased 95
percent from 2020 to 2022. The 2022 average Henry Hub Natural
Gas Spot Price increased 53 percent from 2021. Fertilizer
inputs such as nitrogen, phosphorus, and potassium increased
125 percent in 2021 and an additional 30 percent in the first 5
months of 2022 alone. Urea, the most applied nitrogen
fertilizer, increased 205 percent in price between 2020 and
2022.
Last week marked 1 year since Russia's invasion of the
Ukraine, which perpetuates a disrupted global food supply
system, resulting in continued increased energy prices,
fertilizer cost spikes and shortages, and worsening food
scarcity in developing countries. At the same time, American
consumers are watching in dismay as their grocery and energy
bills skyrocket. The Biden Administration continues to ignore
these crises, neglecting America's producers and consumers. In
fact, this Administration continues to promote nonsensical
regulations and policies that create needless uncertainty for
farmers, ranchers, and working families, further limiting our
ability to meet the growing food demands of our nation and the
world. The challenges facing production agriculture are many.
However, I believe that one of the few silver linings, maybe
the only silver lining, is Americans' heightened awareness of
the importance of a reliable domestic food supply and the
producers who provide it.
As Members of the House Committee on Agriculture in a farm
bill reauthorization cycle, it is our mandate to fully
understand these challenges and work diligently without
partisanship to ensure the passage of a strong farm bill that
addresses the issues highlighted today.
Thank you to the witnesses appearing here before us today.
I look forward to your testimony. And regardless of the
challenges, it is time to retire our dress shoes and put on our
work boots. We have a lot of work to do, and I will need every
one of you at the table to help us deliver a farm bill for the
backbone of this country, the American producer.
[The prepared statement of Mr. Thompson follows:]
Prepared Statement of Hon. Glenn Thompson, a Representative in Congress
from Pennsylvania
Good morning, and welcome to the first House Committee on
Agriculture hearing of the 118th Congress. Our focus this morning will
be on the headwinds facing production agriculture. Without a
comprehensive understanding of industry's challenges, we cannot write
an impactful farm bill that addresses the needs of those who grow,
process, and consume the food, fuel, and fiber we are blessed to
produce here in the United States.
As we seek solutions, it is my vision that this Committee will
provide the necessary tools to our farmers and ranchers to ease the
barriers to production felt in recent years. As Chairman, I challenge
each Member of the Agriculture Committee to view all policies through
the lens of science, technology, and innovation, and identify forward-
looking solutions throughout our work.
Our nation's farmers, ranchers, and foresters are exceptional,
having increased food and fiber production nearly three-fold since the
1940s. They have done so with no relative increase in inputs--serving
as shining stars of sustainability and conservation practices. However,
the uncertainty caused by a global pandemic, geopolitical unrest, and
incessant government intrusion has led to a modest production decline
in recent years.
Enduring production agriculture policies are essential to our
national security. Maintaining a safe, abundant, and affordable
domestic food supply is equally essential, as is meeting the needs of
perennial global food crises.
Over the last several years, I have traveled to more than 40 states
and have heard firsthand from our farmers on issues related to labor,
fuel, fertilizer, inflation, and interest rates. The average cost of
diesel fuel per gallon increased 95 percent between 2020 and 2022. The
2022 average Henry Hub real natural gas spot price increased 53 percent
from 2021. Fertilizer inputs such as nitrogen, phosphorus, and
potassium increased 125 percent in 2021 and an additional 30 percent in
the first 5 months of 2022 alone. Urea, the most applied nitrogen
fertilizer, increased 205 percent in price between 2020 and 2022.
Last week marked 1 year since Russia's invasion of Ukraine, which
perpetuates a disrupted global food system, resulting in continued
increased energy prices, fertilizer cost spikes and shortages, and
worsening food scarcities in developing countries. At the same time,
American consumers are watching in dismay as their grocery and energy
bills skyrocket.
The Biden Administration continues to ignore these crises,
neglecting America's producers and consumers. In fact, this
Administration continues to promote nonsensical regulations and
policies that create needless uncertainty for farmers, ranchers, and
working families, further limiting our ability to meet the growing food
demands of our nation and the world.
The challenges facing production agriculture are many. However, I
believe one of the few silver linings--maybe the only silver lining--of
the coronavirus pandemic is Americans' heightened awareness of the
importance of a reliable, domestic food supply and the producers who
provide it.
As Members of the House Committee on Agriculture in a farm bill
reauthorization cycle, it is our mandate to fully understand these
challenges and work diligently and without partisanship to ensure the
passage of a strong farm bill that addresses the issues highlighted
today.
Thank you to the witnesses appearing here before us today. I look
forward to your testimony.
And regardless of the challenges, it is time to retire our dress
shoes and put on the work boots. We have a lot of work to do, and I
will need every one of you at the table to help us deliver a farm bill
for the backbone of this country--the American producer.
The Chairman. And before I recognize the Ranking Member, I
would like to note the addition of four returning Democratic
Members who were added to the Committee roster yesterday
evening, Representatives Pingree, Carbajal, Craig, and Soto. I
am excited to have all four of you back. Thank you for your
commitment to do that.
And with that, I would now like to welcome the
distinguished Ranking Member, the gentleman from Georgia, Mr.
Scott, for any opening remarks that he would like to give.
OPENING STATEMENT OF HON. DAVID SCOTT, A REPRESENTATIVE IN
CONGRESS FROM GEORGIA
Mr. David Scott of Georgia. Thank you. And I would like to
begin my comments by congratulating Chairman Thompson as we
start the 118th Congress, and how proud I am of the bipartisan
work that our Agriculture Committee did last Congress. We
brought in Agriculture Secretary Vilsack to discuss the state
of the farm economy in January of 2022 and followed that with
19 farm bill review hearings with stakeholders and other
Administration officials. We also held five listening sessions
all across the country, and we got input from farmers and
consumers about how our farm bill programs are working for
them.
In addition, we have an online feedback form, which is
still open and can be accessed on the House Agriculture
Committee's website for both Democratic and Republican
feedback.
And through those hearings, we have been able to get
regular updates on what is happening on the ground and the
needs of our farmers, ranchers, and foresters and what we must
do to make sure we get the farm bill right for all producers
across the country and to ensure we are also tending to our
Congressional oversight responsibilities.
This hearing today broadly refers to uncertainty,
inflation, and regulations as the challenges producers are
experiencing. And as we discuss these important issues and get
input from the witnesses today, I encourage each of my fellow
Committee Members, both Democrats and Republicans, to place
these problems in their proper context. We are still feeling
the impacts of the pandemic on our supply chains. The COVID-19
pandemic disrupted manufacturing across the globe and
exacerbated labor shortages right here at home.
And President Biden's Administration has taken important
actions to address these issues. For example, President Biden
signed the Ocean Shipping Reform Act (Pub. L. 117-146) last
year, and that helped avert a nationwide rail crisis. And the
President worked with us here in Congress to pass two historic
pieces of legislation, the bipartisan Infrastructure Investment
and Jobs Act (Pub. L. 117-58), which included more than $2.9
billion for USDA's rural broadband programs, for water storage,
and a new byproduct pilot program. And that was followed by
passage of the Inflation Reduction Act (Pub. L. 117-169), which
made historic investments in rural America to help our farmers
and rural communities mitigate climate change and continue to
lead the way on renewable energies. These investments in
infrastructure in our farm bill and forestry programs will pay
dividends for farmers well into the future.
And we have also seen how these international conflicts
continue to reverberate throughout our economy. Former
President Trump's trade war with China was devastating to many
American producers and domestic manufacturers. And more
recently, this Russian invasion of Ukraine has had significant
impacts on fertilizer, grain, and fuel costs. And, ladies and
gentlemen, many people may not know, but Russia at that point
was containing and providing 60 percent of all the fertilizer
in the world.
The cause of inflation is not singular in nature. It is the
result of a variety of factors. And with that in mind, we
should also strive to focus on the issues that are within the
House Agriculture Committee's jurisdiction so that we can be
the most impactful in our work ahead for our great nation in
this important, vitally important to every single American, our
agriculture system. I yield back and thank you.
The Chairman. Well, I thank the gentleman. I am looking
forward to our continuing work together here.
Mr. David Scott of Georgia. Yes, indeed.
The Chairman. The chair would request that other Members
submit their opening statements for the record so the witnesses
may begin their testimony and to ensure that there is ample
time for questions.
[The prepared statement of Mr. Miller of Ohio follows:]
Prepared Statement of Hon. Max L. Miller, a Representative in Congress
from Ohio
Agriculture is the number-one contributor to Ohio's economy. The
state has more than 77,800 farms, about \1/2\ of which have livestock
production. Farming also provides one out of seven jobs in Ohio, and
the Buckeye State ranks among the top ten in the nation in number of
farms.
However, Ohio and U.S. farmers continue to face economic
uncertainty due to unprecedented inflationary input costs, diminishing
trade opportunities, and an ever-increasing regulatory framework at a
time when our nation's agriculture producers are called on to meet
global food insecurities.
Washington, D.C. has made life infinitely more difficult for Ohio's
farmers--overburdensome regulations, spiraling crop input costs, and
lowered trade outlook has made it more difficult to own and operate
farm operations in my Congressional district and around the country.
The U.S. Department of Agriculture, in its February 2023
Projections for Agriculture \1\ underscored these concerns, ``Global
economic and market circumstances continue to challenge the U.S.
agriculture sector. Persistent inflation, severe weather events, supply
chain disruptions, high input costs, and Russia's war against Ukraine
continued to pressure commodity prices.'' Concluding, ``Prices for all
crops are forecast to decline starting in 2023/24 for several years.''
---------------------------------------------------------------------------
\1\ U.S. Department of Agriculture (USDA) Projections for
Agriculture 2023-2032, February 15, 2023 (https://www.usda.gov/sites/
default/files/documents/USDA-Agricultural-Projections-to-2032.pdf).
* Editor's note: references annotated with are retained in
Committee file.
---------------------------------------------------------------------------
In addition, USDA has projected U.S. total agricultural exports
will decrease 8% over the next 10 year period--causing more uncertainty
and strain on our nation's farm community. According to economists at
Ohio State University (OSU), inflation and high food costs can have an
impact on U.S. agricultural trade, as when commodity input costs rise
and food prices increase, trading partners `pull-back' purchasing,
therefore reducing U.S. trading opportunities for U.S. farmers .
The noted Ohio State economist \2\ concluded, ``The main issue for
U.S. farmers in that while commodity prices may have been high, input
prices are putting a lot of pressure on the bottom line of farmers.
Global events such as the war in Ukraine and resulting tightening
fertilizer supplies have had a dramatic impact, as while commodity
prices have doubled, fertilizer costs have quadrupled, and volatile
fertilizer increases do not show signs of softening.''
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\2\ Dr. Ian Sheldon, Chair of Agricultural Marketing, Trade and
Policy Ohio State University, Ohio Farm Bureau Podcast. January 2023
(https://soundcloud.com/ohiofarmbureaupodcast/ep-002-inflation-and-
energy-watch-outs-for-ag).
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Furthermore, access to natural gas, a key feedstock and energy
source for nitrogen fertilizer, has been reduced in Europe as well as
in the U.S., and fertilizer freight issues continue to inhibit farmers'
access. As a result, according to OSU Extension officers, farmers may
not be able to apply the appropriate amount of fertilizer as advised,
and it will lessen yield, reduce income to farms, and result in
tightened food supplies.
Inflation is driving up the price of groceries in Ohio,
increasingly pinching Ohioans budgets. So it is not just farmers who
are suffering from spiking food prices--as U.S. families and those in
the Buckeye State have suffered as USDA reports \3\ food-at-home prices
increased by 11.4 percent in 2022--with costs continuing to rise 7.1
percent thus far in 2023.
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\3\ USDA Food Price Outlook, February 23, 2023 (https://
www.ers.usda.gov/data-products/food-price-outlook/).
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OSU Extension experts note that inflation can affect crop
production in a number of ways. For the producer, it can increase the
costs of inputs such as seeds, fertilizers, and labor, which can reduce
farmers' profit margins and make it more difficult for them to invest
in new technology or expand their operations. For the consumer,
inflation can lead to higher food prices, which can reduce consumer
demand for agricultural products and hurt farmers' production and
sales. This can also increase the cost of living for farmers and rural
communities.
Faced with these mounting pressures, farmers in Ohio and across the
country are bracing for a substantial drop in farm income, which USDA
\4\ projects to decrease by 17.8 percent in 2023. After 2 strong years
of growth, U.S. farm income is forecast to drop substantially in 2023
as commodity prices fall and expenses rise, and with food prices
projected to rise into 2023. The Ohio Capital Journal concluded, ``The
nation's producers will not be reaping the financial benefits.'' \5\
---------------------------------------------------------------------------
\4\ USDA Projections for Agriculture 2023-2032, February 15, 2023.
\5\ Editor's note: the article referred to is retained in Committee
file; in entitled, USDA projects farm income will fall in 2023 after 2
robust years, dated Feb. 8, 2023, and is available at https://
ohiocapitaljournal.com/2023/02/08/usda-projects-farm-income-will-fall-
in-2023-after-two-robust-years/.
---------------------------------------------------------------------------
Federal regulations also have a direct impact on farmers and
ranchers, and over the years, the breadth and extent of that regulatory
landscape have increased dramatically. Farmers and ranchers in my
District also are certainly challenged on the regulatory front. While
farm bill programs such as conservation programs crop insurance and
provide valuable tools--producers continue to confront numerous
regulatory challenges.
I was glad to join a bipartisan resolution sponsored by the
Chairman of this Committee calling for commonsense resolution of the
Waters of the U.S. Rule, which provides an unworkable test for
jurisdiction of when the Federal Government regulates farms and
ranchers, and creates uncertainty for agriculture as they work to
sustain vital conservation resources.
I am heartened by efforts such as the Ohio Agriculture Conservation
Initiative (OACI), a partnership in my state between agriculture,
conservation, environmental and research communities to recognize
farmers for their dedication to advancing methods that improve water
quality in Ohio and increasing the number of farm best management
practices. Farmers have a commitment to the preservation of natural
resources and maintaining the land for future generations, and I look
forward to working with this Committee on the farm bill to ensure
access to sound conservation practices.
The many challenges facing Ohio and U.S. farmers, as highlighted in
recent USDA official forecasts, remain a concern, ``Economic growth
continues to contract as high levels of inflation persist worldwide,
lower growth in China, and negative ramifications from Russia's war
against Ukraine materialize in high food and energy prices and lower
global trade . . . painting a gloomier economic outlook for the near
future.''
However, I remain committed to working with farmers and ranchers in
my Congressional district, along with Members of this Committee, to
make a meaningful difference in the upcoming farm bill to promote and
sustain vital agriculture production in our nation.
The Chairman. Let me introduce our witnesses. We have a
very experienced, talented, and diverse panel of witnesses
today as we look at the landscape in which the American
producers have to work in today. This is a great, great hearing
to help guide us in our farm bill as we develop the farm bill.
So our first witness today is Mr. Zippy Duvall, President
of the American Farm Bureau Federation. Our next witness is Mr.
Peter Friedmann, who is the Executive Director of the
Agriculture Transportation Coalition. Our third witness today
is Mr. Corey Rosenbusch, the President and Chief Executive
Officer of The Fertilizer Institute. Our fourth witness today
is Mr. Michael T. Twining, who is the Vice President of Sales
and Marketing for Willard Agri-Service. And our fifth witness
today is Mr. Mike Brown, President of the National Chicken
Council. Our sixth and final witness today is Rob Larew, who is
the President of the National Farmers Union.
Thank you to all of our impressive witnesses for joining us
today, and we are now going to proceed to your testimony. You
each have 5 minutes. The timer in front of you will count down
to zero, at which point your time has expired, and we would ask
that you wrap up whatever thought that you are at that point.
And thank you for your written testimony that you have
submitted, which all Members have in front of them.
So, Mr. Duvall, please begin when you are ready.
STATEMENT OF VINCENT ``ZIPPY'' DUVALL, PRESIDENT, AMERICAN FARM
BUREAU FEDERATION, WASHINGTON, D.C.
Mr. Duvall. Well, thank you, Mr. Chairman. And thank you,
Ranking Member Scott, from my home state and my good friend,
and other Members of the Committee. And I want to begin by
thanking all of you for the work that you do for the American
farmer and rancher.
The country that cannot feed its people is not secure, so
the strong foreign policy that supports a strong food system
truly is part of a smart national security strategy. There are
certainly plenty of challenges for American agriculture, from
losses experienced in a trade war with China, to the pandemic
lockdowns, to the supply chain disruptions. Add to that a
record high supply cost and you see how farmers and ranchers
have faced unprecedented volatility in recent years.
USDA's most recent Farm Sector Income Forecast sees a
decrease in net farm income in 2023 down 15.9 percent. Adjusted
for inflation, that is an 18 percent drop. The same report
estimates that farm/ranch production expenses will continue to
increase by $18 billion. That follows a record increase of $70
billion in 2022. Short- and long-term interest rates are also
high and rising double and triple of what it was just a year
ago. And if we remember the high interest rates caused by the
high inflation and the Fed stepping up to address inflation led
to a farm debt crisis in 1980s. We need to be sure that the
doubling and tripling of interest rates does not cause similar
pressures on our farmers.
I am especially concerned about our beginning farmers,
those that are forced to borrow for succession planning, and
other farmers who have made recent new investments.
Affordable, reliable, abundant energy is critical to
farmers and ranchers. Energy is necessary for all farm
production, and we continue to ride a rollercoaster ride of
high energy and input costs. But along with the challenges,
there are humongous opportunities ahead for agriculture.
Innovation and research are helping us do more with less. Our
advances in sustainability are truly impressive. But in order
to seize the opportunities ahead and continue achievements, we
need a strong foreign policy. We need a supportive regulatory
environment. The Federal regulations have a direct impact on
farmers and ranchers. Today's farmers and ranchers face a
flurry of requirements and challenges: the new Waters of the
U.S. rule, the Endangered Species Act, access to important crop
protection tools, immigration and labor regulations, and now
agencies such as the SEC imposing on our farmers and ranchers
new climate regulations that are meant for Wall Street. Much
uncertainty remains related to the ability of farmers and
ranchers to access affordable supplies and deal with the
regulatory and weather-related challenges.
Expected revenue decline has more than erased the gains
that we made during 2022, so it becomes more and more important
for farmers to have clarity on rules that impact their business
and ability to operate. Growers need to have access to
comprehensive risk management options. They deserve a
resounding voice during formulation of vital legislation such
as the farm bill, and the farm bill is a critical took that
ensures our nation's food supply remains secure.
Farm Bureau supports the following principles to guide
development of programs in the next farm bill. We want to
increase the baseline funding commitments on farm programs. We
want to maintain a unified farm bill that includes nutrition
programs and farm programs together. And we want to prioritize
the funding for risk management tools, which include both
Federal crop insurance and commodity programs. The 2023 Farm
Bill presents an important opportunity for lawmakers to rise
above partisanship.
I urge you to work together again to pass legislation that
protects the food security for all Americans and ensures the
future success for our farmers and ranchers. Farm bill will
stand against the threat of long-term resiliencies of our rural
communities. For your part, Congress must protect American
agriculture and modern production practices from undue burdens.
Farmers and ranchers are the highest and most trusted
profession in America. I ask Congress to trust farmers and
ranchers, too, and respect the ability to innovate and solve
problems. We are committed to doing the right thing and
appreciate the support of this Committee.
And thank you, Mr. Chairman, for holding this hearing
today, and I look forward to the questions from you in just a
little while. Thank you.
[The prepared statement of Mr. Duvall follows:]
Prepared Statement of Vincent ``Zippy'' Duvall, President, American
Farm Bureau Federation, Washington, D.C.
Mr. Chairman and Members of the Committee, my name is Zippy Duvall.
I am a third-generation farmer and President of the American Farm
Bureau Federation, and I am pleased to offer this testimony on behalf
of the American Farm Bureau Federation and Farm Bureau members across
this country.
There are certainly plenty of challenges for American agriculture.
Beginning with losses experienced from the trade war with China,
pandemic lockdowns, supply chain disruptions, and record-high input
costs, farmers and ranchers have been facing unprecedented volatility
in recent years. Recognizing that other witnesses might cover some of
these challenges more in-depth, I want to briefly highlight market
uncertainties, energy affordability and potential regulatory burdens
that will have an impact on farmers, ranchers and our rural
communities.
While there are challenges, I remain optimistic for the future of
American agriculture. Through science, technology and innovation and
the get-it-done attitude of rural Americans, no challenge has been too
great. But we also must make sure that farmers and ranchers have the
tools necessary to succeed, including support from good public policy
and strong markets both domestically and abroad.
Uncertainty
USDA's most recent Farm Sector Income Forecast,\1\ released Feb. 7,
sees a decrease in net farm income in 2023. U.S. net farm income, a
broad measure of farm profitability, is currently forecast at $136.9
billion, down 15.9% from 2022's $162.7 billion. This $25.9 billion
decline erases the $21.9 billion increase that was forecast between
2021 and 2022. Adjusted for inflation, 2023 net farm income is expected
to decrease even more: $30.5 billion (18.2%). The report expects farm
and ranch production expenses to continue to increase by $18.2 billion
(4.1%) in 2023 to $459.5 billion, following a record increase of $70
billion in production expenses in 2022.
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\1\ https://www.ers.usda.gov/topics/farm-economy/farm-sector-
income-finances/farm-sector-income-forecast/.
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The largest decrease in net farm income is tied to a projected fall
in cash receipts from livestock due to lower prices for all major
categories except cattle. The value of livestock production (in nominal
dollars) is expected to decrease nearly 6%, or $14.7 billion, in 2023.
Chicken eggs and milk are responsible for the largest percentage
decreases, with cash receipts for chicken eggs projected to decrease by
$4.9 billion or 24%. Highly pathogenic avian influenza has affected
over 52 million birds in commercial flocks in the U.S., including over
43 million egg layers, pressuring supplies and pushing up prices. As
the flock recovers, egg production increases and consumer demand
fundamentals recalibrate prices lower. Milk receipts are similarly
expected to decline $8.4 billion (14.6%) on expectations for higher
milk production and lower corresponding prices.
Cash receipts for cattle and calves are estimated to increase by
$2.1 billion or 2.4%; but this is because drought conditions in the
West and southern Plains have damaged pastures and led to higher costs
for feed such as hay. This has resulted in many farmers marketing
heifers that would typically be kept for breeding and herd replacement,
resulting in a reduction in U.S. cattle inventory that will continue
for years. Tighter cattle supplies have pulled both cash and futures
prices higher, leading to continued growth in cash receipts and
marketing of cattle.
On the crops side, receipts for many major row crops like corn and
soybeans are expected to decline, though wheat and hay are expected to
increase. Receipts for corn are expected to fall by 4.5% ($4.1
billion), while soybeans are expected to be down 8.1% ($5.2 billion).
Wheat is expected up 4% ($0.6 billion) and hay receipts are expected to
grow by $0.6 billion (6.1%). Fruits and nuts are expected to hover
close to $30.8 billion in receipts, while vegetables and melons are
poised to fall from $21.8 billion to $19.9 billion (^8.6%). The vast
majority of expected receipt declines are linked to falling prices
rather than volume dynamics.
Weather and climate conditions will have strong impacts on the true
outcome of this year's price outlook. Extreme drought that has pushed
up hay and wheat prices could subside marginally after a winter of
strong (so far) Western precipitation and snow. Record corn and soybean
production in exporting countries like Brazil and Argentina are
competition for U.S. crops overseas, particularly in the China market.
Uncertainty related to Mexico's commitment to ban GMO corn for human
consumption and the ongoing Ukraine-Russia \2\ conflict remains.
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\2\ https://www.fb.org/market-intel/ukraine-russia-volatile-ag-
markets.
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On the cost side, production expenses, including operator dwelling
expenses, are forecast to increase for a sixth consecutive year,
growing in 2023 by $18.2 billion, or 4.1%, to reach a record $459.5
billion. And while it's little consolation, some major input items such
as cumulative feed costs, fertilizers and fuels and oil are expected to
decline from record highs. Feed costs, which represent the largest
single expense category, are expected to decline $3.92 billion to
$72.66 billion (^5%). Fertilizers, lime and soil conditioners are
expected to decrease $1.25 billion, or 3%, from $43.42 billion to
$42.17 billion. Typically, fertilizers represent about 15% of a crop
farmer's costs and any increase, regardless of magnitude, can be
crushing for some producers, especially in times of declining revenue.
Fuels and oils are expected to experience the largest percent decline--
17%--from 2022, moving from $20.25 billion to $17.1 billion. These
drops, however, are easily outpaced by increases in other expense
categories including marketing, storage and transportation, which are
forecast to increase 11%. Labor costs are expected up across all
subcategories, with cash labor forecast to move from $39.2 billion to
$42.08 billion (+7%). Inflation, currently sitting at 6.5%, remains a
source of uncertainty and is eroding asset values; and interest
expenses have increased as the Federal Reserve Bank attempts to bring
inflation under control through higher rates. Between 2022 and 2023,
interest expenses, including operator dwellings, are expected to jump
22%, going from $27.6 billion to $33.84 billion, making it more
difficult for farmers and ranchers to acquire lines of credit to
purchase inputs and equipment this year. Livestock, seed, electricity,
repair and maintenance are among the other categories expected to
increase in price.
Other farm income, which includes things like income from custom
work, machine hire, commodity insurance indemnities and rent received
by operator landlords, is estimated to increase by $3.2 billion, or 8%,
from $42 billion to $45.2 billion in 2023. But when all these factors
are accounted for, the resulting expectations for net farm income
decline become apparent.
USDA's Farm Sector Income Forecast also provides expectations of
farm financial indicators that provide insight into the overall
financial health of the farm economy. During 2023, U.S. farm sector
debt is projected to increase $31.19 billion, or 6.2%, to a record $535
billion in nominal terms. Nearly 70% of farm debt is in the form of
real estate debt, for the land to grow crops and raise livestock. Real
estate debt is projected to increase $26.79 billion to a record-high
$375.8 billion, largely due to an increase in land values \3\ across
the country. Non-real estate debt, or debt for purchases of things like
equipment, machinery, feed and livestock, is projected to increase by
$4.4 billion to a record $159.1 billion. The value of assets regularly
being purchased with debt is rising, which means it will continue to be
important for farmers and ranchers to pay down debt and cover interest
to maintain a healthy balance sheet, an endeavor that will be even more
cumbersome within a high interest environment.
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\3\ https://www.fb.org/market-intel/farm-inputs-u.s.-agricultural-
land-values-show-record-increase.
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Based on 2023 debt and asset levels, USDA expects the debt-to-asset
ratio to be 13.22% for 2023, which sits marginally below the prior 5
year average (13.5%), meaning farmers are expected to hold steady on
borrowing to finance the purchase of assets. Higher interest rates will
likely act as a barrier for farmers to finance new assets, and will
then likely drive down the value of these assets over the next couple
of years.
Working capital, which takes into consideration current assets and
liabilities, is the amount of cash and cash-convertible assets minus
amounts due to creditors within 12 months. In 2023, working capital is
projected to fall by $14.9 billion, or 8.9%, to $118 billion, which is
the first decline since 2016, and sits at $2.5 billion below 2014
levels, when farmers and ranchers held $121 billion in working capital.
Lower levels of working capital often suggest that many U.S. farmers
have just enough capital to service their short-term expenses and debt,
which becomes more difficult as interest rates rise.
Inflation
Short- and long-term interest rates are also high and rising. In
recent years, interest expense has been about 5% of farm cash
production expenses. Farmers will be facing interest rates double and
triple what they were just a few years ago, with corresponding
increases in interest expense; high interest rates, caused by both high
inflation and the Fed's steps to address inflation, led to the farm
debt crisis in the 1980s. A doubling or tripling of interest expenses
now could cause similar pressures, especially for any farmer already
committed to new investments, beginning farmers or farmers forced to
borrow for succession. If history is a guide, it could take years for
long-term interest rates to come back down to where they were for the
last decade.
Higher interest rates tend to lower property values, including
farmland values, which would make worse the debt trap of higher
interest rates and lower farm returns. Rising interest rates will raise
the cost of all debt, including government debt, which will ultimately
cost the taxpayer and limit the government's flexibility to provide
assistance in a debt crisis. Inflation is slashing the purchasing power
of American consumers, and weakening the economy, which both undercuts
demand for farm products and lowers prices. Inflation undermines the
real value of USDA programs, including the value of reference prices
and budgets for most commodity programs.
The aggressive interest rate increases by the Fed are making the
dollar attractive to foreign investors and strengthening the dollar,
which undermines U.S. agricultural export competitiveness. A Fed-driven
recession in the U.S. is bad for the global economy, which will also
undermine U.S. agricultural exports.
Energy
Affordable and abundant energy is critical for farmers and ranchers
as it is a major factor for input costs. The price of crude oil is the
main factor in the price of diesel fuel and gasoline, and fluctuations
in the crude oil market greatly influence changes in prices.
On March 8, President Biden announced a ban on U.S. imports of
petroleum, coal and natural gas from Russia in response to Russia's
further invasion into Ukraine. The ban includes crude oil and petroleum
products. It was well reported at the time that in 2021, imports from
Russia only accounted for 3% of the U.S.'s crude oil imports. However,
less discussed is that Russia accounted for a 20% share of U.S. imports
of petroleum products in 2021. Petroleum products, namely unfinished
oils and fuel oil, are used by the U.S. as a supplement to crude oil in
the refining process. According to the U.S. Energy Information
Administration (EIA), a substantial share of the unfinished oils from
Russia was used as a supplementary refinery input and has qualities
similar to a heavier, relatively high-sulfur crude oil. These higher-
sulfur oils are heavily used in the production of diesel fuels.
U.S. imports of distillates (a category of petroleum distillation
fractions that includes primarily diesel fuel and fuel oil) were lower
in 2021-2022, relative to 2020-2021. Additionally, U.S. exports of
distillates are higher in 2021-2022, relative to 2020-2021. Russia's
invasion of Ukraine has had significant impacts on global markets for
crude oil and petroleum products, not just U.S. markets. These
disruptions have created unusual marketing opportunities for producers
of oils and fuels and resulted in some unusual product flow. The result
for the U.S. diesel market is a net decrease in distillate trade,
further tightening U.S. supplies.
Beyond the impact of Russia, since 2019, diesel production capacity
has dropped by about 180,000 barrels per day. This is equivalent to
about 4% of current diesel production. Effectively, this means that the
price of diesel fuel--upon which farmers rely very heavily to run
equipment and to bring their supplies in and to ship their products out
on rail, truck and barge--have stayed high, even as gasoline prices
have moderated.
Farm Bureau strongly supports the development of a national energy
policy that provides for increased exploration and use of domestic
energy resources. In addition, Farm Bureau advocates policies that will
create a diverse, domestic energy supply to fuel America's economic
growth and prosperity while strengthening our energy security. Further
development and use of renewable energy sources such as ethanol,
biodiesel, renewable diesel, biomass, solar and wind are critical to
our nation's energy future and will help further strengthen the overall
national security of the United States.
Regulations
All Americans have an interest in a regulatory process that is
transparent and fact-based, respects the will of Congress, and observes
the separation of powers in the Constitution. Federal regulations have
a direct impact on farmers and ranchers, and over the years, the
breadth and extent of that regulatory landscape have increased. AFBF
has taken a stand against regulatory overreach and is working to reform
the Federal regulatory process and preserve farmers' and ranchers'
land-use and water rights.
Today, farmers and ranchers are faced with a flurry of requirements
through the Clean Water Act, the Endangered Species Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Food Safety
Modernization Act, immigration and labor regulations, and
interpretation of the Federal Land Policy and Management Act--to name
just a few.
Often, these requirements are the result of Federal regulations;
sometimes they emanate from court decisions. But no matter how they are
established, the result often can be controversial. Stakeholders can
disagree on the language in the statute, and affected parties can also
disagree on the science, the data or the models underpinning one or the
other.
Farm Bureau strongly believes that all Americans, including farmers
and ranchers, need a regulatory system that is fair, transparent,
adheres to the will of Congress, takes economic impacts into account
and respects our freedoms.
WOTUS
The EPA and the U.S. Army Corps of Engineers have finalized a new
Waters of the United States (WOTUS) rulemaking that repeals the
Navigable Waters Protection Rule, doubles down on the unworkable
``significant nexus test'' and creates more complicated, overreaching
regulations.
The new rule greatly expands the Federal Government's regulatory
reach over private land use because it allows it to regulate ditches,
ephemeral drainages and low spots on farmland and pastures. This could
impact everyday activities such as plowing, planting and fence-building
in or near these areas.
This rulemaking brings us further away from the clarity and
predictability achieved by the Navigable Waters Protection Rule. This
is important for farmers and ranchers because the penalties for non-
compliance are significant. A simple misjudgment by a farmer in
determining whether a low spot is or isn't subject to the regulation
can trigger substantial civil fines as well as criminal penalties.
Farmers and ranchers care about clean water and preserving the
land, both of which are essential to producing healthy food and fiber
and ensuring future generations can do the same. That's why we
supported the Navigable Waters Protection Rule. Farmers play a leading
role in protecting our nation's wetlands and unfortunately, the new
WOTUS rule could prevent farmers from incorporating beneficial
conservation practices into their operations. Farmers and ranchers
often take on projects that provide stormwater management, wildlife
habitat, flood control, and nutrient processing and improve overall
water quality in uplands and ephemeral features. But, if they cannot do
this without applying for a Federal permit, it may be cost-prohibitive,
resulting in environmental degradation, not protection. Additionally,
over the last 15 years, the number of acres enrolled in wetland and
buffer practices under the Conservation Reserve Program has more than
doubled (from 2.5 million acres to 5.3 million acres). In addition,
more than 140 million acres of U.S. farmland are used for voluntary
conservation efforts and wildlife habitats--an area equal to the states
of California and New York combined. Finally, farmers advocate for and
support commonsense rules that don't require a team of consultants and
lawyers to navigate.
Endangered Species Act
Preserving natural surroundings for America's wildlife has long
been a priority for America's farmers and ranchers. Today, Americans
have a growing understanding of and appreciation for wildlife
conservation. There are countless examples of effective voluntary
conservation programs and practices that are being implemented at the
state and local level. However, the Endangered Species Act (ESA) is
long overdue for a meaningful update that recognizes these voluntary
efforts to restore and enhance habitats.
Endangered and threatened species protection can be more
effectively achieved by providing incentives to private landowners and
public land users rather than by imposing land use restrictions and
penalties. We must all be good stewards of our natural resources and
wildlife habitats.
Farm Bureaus across the country have played a leading role in
education, outreach and goal setting to protect at-risk species such as
the monarch butterfly and lesser prairie chicken. Unfortunately, ESA
listings often entangle farmers and ranchers in bureaucratic red tape
rather than providing a path to achieve shared conservation goals.
National Environmental Policy Act
The National Environmental Policy Act (NEPA) was enacted in 1970,
designed to ensure that environmental impacts are considered in
proposed agency decision-making. NEPA's requirements apply to a broad
range of actions affecting the daily lives of Americans across the
country. From the construction of roads, bridges, highways,
transmission lines, conventional and renewable energy projects,
broadband deployment, and water infrastructure to management of
activities on Federal lands, such as grazing, forest management, and
wildfire protection to environmental restoration and other projects. We
support the over-riding goal for better environmental decisions in a
cost and time-efficient manner.
However, Farm Bureau members have experienced significant delays in
obtaining and renewing Federal grazing permits as well as securing
timber sale contracts with many averaging over 7 years to complete. In
some cases, NEPA reviews have taken a decade or more to complete, and
often get caught in a cycle of litigation. Farm Bureau policy supports
immediate simplification, improvement, and streamlining of NEPA. NEPA,
and its implementing regulations, should reflect current technologies,
agency practice, eliminate obsolete provisions, and improve the format
and readability of the regulations while reducing unnecessary paperwork
and promoting better decision-making consistent with NEPA's statutory
requirements. We encourage Congress to update this decades-old law.
Crop Health
Protecting our sustainable food supply starts with protecting crops
while they are still in the ground or on the tree or vine. To that end,
farmers and ranchers rely on a variety of tools and techniques as they
grow the crops that will become our food, fiber and renewable fuel.
Specific methods of crop protection vary from farm to farm based on
regional climate and specific threats to crops, such as weeds, pests
and invasive species. Crop protection tools, like herbicides, also
enable environmentally beneficial practices such as reduced- or no-
till, which sequester carbon and promote healthy soils. Additionally,
it's critical farmers have access to a variety of pesticides to ensure
the most effective product can be used for the targeted pest and
prevent resistance issues. Above all, safety is the top priority for
farmers when using any kind of pesticide, and thanks to advances in
technology, farmers can be precise in their applications, down to the
individual plant.
Farmers need access to affordable and effective crop protection
chemistry, but this is threatened by the push to regulate pesticides in
ways that directly contradict decades-long science-based conclusions
from the EPA. We need legislative clarity that acknowledges states have
the right to build on the Federal Government's baseline regulations but
limits their ability to directly contradict the scientific findings and
rigorous review process of the experts at the EPA.
Labor
Farmers and ranchers need a reliable, skilled workforce. Farm work
is challenging, often seasonal and transitory, and with fewer and fewer
Americans growing up on the farm, it's increasingly difficult to find
American workers attracted to these kinds of jobs. Not all farm jobs
can be replaced by machines. There are certain farm jobs, like tending
livestock and pruning or picking fresh produce, that require a human
touch. Where American workers are unwilling or unavailable, workers
from other countries have provided crucial support to American
agriculture.
Congress needs to pass responsible immigration reform that
addresses agriculture's current experienced workforce and creates a new
flexible guest worker program. Instability in the agricultural
workforce places domestic food production at risk--increasing
immigration enforcement without also reforming our worker visa program
could cost America $70 billion in agricultural production.
Grain Inspection, Packers, and Stockyards Administration
The Packers and Stockyards Act was enacted in 1921 and prohibits
unfair, deceptive, and unjust discriminatory practices by market
agencies, dealers, stockyards, packers, swine contractors, and live
poultry dealers in the livestock and poultry industries. Farm Bureau
has long advocated for remedies that provide fairness and transparency
for poultry growers, while maintaining provisions that keep hog and
cattle markets flexible and competitive.
Dairy
Modernizing our Federal Milk Marketing Order system is an important
step to provide dairy farmers with confidence in how their milk is
priced in today's market environment. In the 2018 Farm Bill, a Class I
formula change resulted in nearly $750 million less in the Federal
Order pool during COVID-19 market disruptions, meaning lower checks for
many farmers across the country. In 2021, the latest data point
available, for each $27.50 per hundredweight spent, dairy farmers
received only $21.23, a loss of $6.27 per hundredweight. It is
essential that adjustments are made both legislatively and through the
Federal Order hearing process to ensure the system works fairly for all
dairy farmers. Switching back to the higher-of Class I pricing formula
in the most expedient manner possible is necessary to provide farmers
with more price certainty.
Make allowances, a fixed deduction from each milk product formula
used to offset processing costs, are expected to be a primary topic for
dairy industry stakeholders to consider in future Federal Order
discussions. Currently, make allowances can be changed using
information from voluntary cost of processing surveys taken by
different researchers across the country. Voluntary participation means
some processors may be left out when establishing data points
stakeholders then use to formulate milk checks, potentially skewing
dairy farmers' checks negatively. Mandatory processing cost surveying
would provide farmers the assurance that any make allowance increase
reflects true costs borne by processors. This will have to be done
legislatively as USDA does not have the power to authorize without
Congress. Other priorities include a switch to modified bloc voting
during the Federal Order hearing process, which would give farmers the
opportunity to vote independently and confidentially if they so desire.
Milk check transparency and uniformity can help provide farmers with
clarity and confidence in how they are being paid.
Securities and Exchange Commission Climate Disclosure Regulations
In March 2022, the Securities and Exchange Commission (SEC)
proposed a rule requiring public companies to include climate-related
disclosures in their financial statements. Notably, the rule would
necessitate the disclosure of the public companies' ``Scope 3''
emissions, indirect emissions from upstream and downstream activities
in their supply chains.
The rule applies throughout a publicly traded company's value
chain, burdening all agricultural producers, particularly small- and
mid-sized farm operations.
The Scope 3 emissions reporting requirement could impact most farms
since a majority of agricultural products are used or sold by a
publicly traded company. Ninety-eight percent of all farms in the U.S.
are independent, family operations that do not have the resources to
track and report the emissions data necessary to meet the disclosure
requirements. The increased production costs and difficulty in
supplying emissions data to public companies will hinder our ability to
compete in global markets and will encourage further market
consolidation and vertically integrated supply chains.
Farmers and ranchers already comply with expansive legislative and
regulatory directives that exist at the local, state and Federal
levels. The SEC's proposed rule seeks to further extend regulatory
burdens on farmers and ranchers, all while lacking appropriate
statutory authority. In fact, Congress has been very clear that
agencies may not require mandatory reporting of greenhouse gas
emissions from livestock.
The SEC's primary purpose is to enforce the law against market
manipulation and fraud. However, this rule moves well beyond its
traditional regulatory authority by mandating climate change reporting
requirements that will not only regulate publicly traded companies but
will impact every company in the value chain. More importantly, this
rule could require public companies to force farmers and ranchers to
report personal information and business-related data, raising serious
privacy concerns. In this capacity, the SEC would be granted
unprecedented jurisdiction over America's farms and ranches,
potentially creating onerous compliance requirements for even small
farms and ranches with few or no employees.
Farmers and ranchers have never been subjected to SEC oversight
and, in fact, no company involved in agricultural production for crops
or livestock is a registrant with the SEC. Unlike the large
corporations the SEC presently regulates, family farms and ranches do
not have teams of compliance officers or access to the financial
resources compliance would require.
Farmers and ranchers have been on the forefront of climate
mitigation efforts from the very beginning, working on conservation
stewardship efforts and decreasing their greenhouse gas emissions \4\
through voluntary efforts. This rule could undermine that progress and
force mandates that could eliminate many farms and ranches. If the SEC
does not take into consideration these concerns in their final rule,
farmers and ranchers will be looking to Congress to intervene. One way
to do that is to pass H.R. 1018, the Protect Farmers from the SEC Act.
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\4\ https://www.fb.org/market-intel/2020-epa-emissions-inventory-
demonstrates-agricultures-advancements-in-sust.
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Conclusion
Much uncertainty remains related to the ability of farmers and
ranchers to cost-effectively access inputs and deal with regional
regulatory and weather-related challenges. With an early expectation of
revenue declines, which more than erase gains made during 2022, it
becomes all the more important for producers to have clarity on rules
that impact their businesses' ability to operate, for producers to have
access to comprehensive risk management options and for producers to be
given a resounding voice during formulation of vital legislation such
as the farm bill, which can either complicate or streamline farmers'
and ranchers' ability to contribute to a reliable and resilient U.S.
food supply sustainably.
The farm bill is a critical tool for ensuring our nation's food
supply remains secure. No one buys insurance for the good times, and
similarly, farm bill programs provide critical tools to help farmers
and ranchers manage risk. Farm programs are written to provide a basic
level of protection to help offset bad economic times and severe
weather. The 2018 Farm Bill brought certainty to farm and ranch
families through crop insurance, improved risk management programs and
support for beginning farmers and ranchers, while also providing much-
needed funding for trade development and ag research.
As you can hear from my testimony, farming is a difficult and risky
business, yet critical to the well-being of our country. It's often
stated that food security is national security. Few pieces of
legislation are more significant than the farm bill when it comes to
ensuring our food system is secure. We urge lawmakers to recognize this
significance as they consider updating and improving the farm bill.
Farm Bureau supports the following principles to guide development
of programs in the next farm bill:
Increase baseline funding commitments to farm programs;
Maintain a unified farm bill that includes nutrition
programs and farm programs together; and
Prioritize funding for risk management tools, which include
both Federal crop insurance and commodity programs.
The farm bill has been a bipartisan effort in the past. The 2023
Farm Bill presents an important opportunity for lawmakers to rise above
partisanship and work together again to pass legislation that protects
food security for all Americans and the future success of our farmers
and ranchers.
Farm Bureau will continue to work to ensure that farm families
maintain their ability to feed, fuel and clothe the world and defeat
public policy that threatens the long-term resiliency of our rural
communities. Congress must protect American agriculture and production
practices from undue burden, and respect farmers' and ranchers' ability
to innovate and solve problems.
American farm families want to leave the land better than when it
was first entrusted to our care. That is the story of my family's farm
in Georgia and the story of millions of farms across this country. We
want to protect the planet, feed and clothe people, and promote vibrant
communities. Working with our partners, land-grant universities,
policymakers, and the farmers and ranchers we represent, Farm Bureau
intends to continue finding solutions for the challenges of the future.
Mr. Chairman, I commend you for convening this hearing and for all
your hard work on behalf of agriculture across the country. I will be
pleased to respond to questions.
The Chairman. Thank you, Mr. Duvall, I appreciate it.
Mr. Friedmann, please begin when you are ready.
STATEMENT OF PETER FRIEDMANN, EXECUTIVE DIRECTOR, AGRICULTURE
TRANSPORTATION COALITION,
WASHINGTON, D.C.
Mr. Friedmann. Thank you very much, Mr. Chairman, for
holding this hearing. The timing is very important.
A number of years ago, some newspaper called the
Agriculture Transportation Coalition the principal voice of
U.S. agriculture and agriculture exporters in transportation
policy, and we have taken that very seriously. But before I
begin, I would like to recognize a couple of Members of your
Committee who achieved more for agriculture exports when it
comes to transportation than has been achieved in decades and
did it last year. Congressman Dusty Johnson and Congressman Jim
Costa, together with Congressman John Garamendi, authored the
Ocean Shipping Reform Act of 2022, absolutely critical. It is
essential. It has already changed the practices, and ocean
transportation has changed what the foreign ocean carriers are
doing. And I want to thank you, this Committee, and thank you,
Congressman Johnson and Congressman Costa, for leading the
charge on that, incredible. And as Congressman Scott mentioned
something about bipartisan, incredible. It passed the Senate
unanimously and it passed here three times overwhelmingly, so
thank you very much, really critical.
Why is the transportation so important? It is because there
is virtually nothing produced in agriculture or forest products
in this country that cannot be sourced somewhere else in the
world. If we aren't able to deliver it affordably and
dependably to our foreign customers, those foreign customers
have other places to go. They will find substitutes, and in the
past they have done so. And when they do so, it is very
difficult for us, the U.S. agriculture, to get those markets
back again. And there are plenty of stories in cotton and
soybean and almonds and walnuts and so forth about lost foreign
markets because our transportation did not facilitate the flow
of affordable, dependable supply.
So let me just say that Federal and state policies can
facilitate the flow of commerce, agriculture exports, or they
can hinder it. And so I would like to highlight a couple of
those. Now, first, I want to go back to the Ocean Shipping
Reform Act because it is still very much in play. You all
passed the legislation last year, but now, the Federal Maritime
Commission has to implement it. And those entities that were
opposed to this legislation, fortunately, unsuccessfully,
overwhelmingly defeated, are now trying to undo some of those
reforms at the Federal Maritime Commission as it goes through
the rulemaking process. Fortunately, the Federal Maritime
Commission has five Commissioners, Republicans and Democrats,
that are 100 percent aligned and on board with the interests of
agriculture exports, as well as importers, exporters, all the
American interests, but still, the rulemaking process sometimes
provide some access for those who would oppose the legislation
to achieve their goals down there. So we really do need this
Committee and this Congress to continue to monitor what goes on
down there, and we will be back with specifics from time to
time as needed.
So that continued engagement is critical. Let me just tell
you one of the things it did. The ocean carriers, foreign ocean
carriers--and there are only ten of them in the world, we are
dependent on ten ocean carriers, all foreign companies, to get
all our agricultural products out and the inputs that much of
agriculture needs into the country. They have now invested
millions of dollars, which they made over the last 2 years, in
upgrading all their systems. And it has already provided some
evidence. We have seen evidence of that improvement.
We do have more work to do. Truck weights need to be
increased. Members of this Committee introduced the SHIP IT Act
(H.R. 471, Safer Highways and Increased Performance for
Interstate Trucking Act), which increased truck weights to a
level that is even closer to what Canada and Europe and all our
trading partners do. We have the lowest truck weight limits in
the world in some of our states, and in California it creates a
barrier to agriculture exports. The lowest truck weight limits
in the world, increasing congestion, increasing delay, and
increasing emissions. It is almost an embarrassment when you
talk to Canadians or any other country.
We need more truck drivers, and there is legislation and
pilot projects underway to get more people, young people when
they graduate from high school, maybe they want to go into
truck driving, they can't now. This will facilitate that. We
need more of that.
We do need a resolution of the port longshore labor dispute
and the contract negotiations on the West Coast that has been
going too long, and we are hopeful, and maybe oversight from
this Committee will help because it is causing a shift in
transportation services from the West Coast to the East and
Gulf Coast.
We do need inland rail depots and really can use your help
there because agriculture needs more of those. Thank you very
much.
[The prepared statement of Mr. Friedmann follows:]
Prepared Statement of Peter Friedmann, Executive Director, Agriculture
Transportation Coalition, Washington, D.C.
The Agriculture Transportation was established in 1988 to provide a
voice for a broad cross-section of U.S. agriculture exporters,
importers requiring dependable, affordable ocean, rail and truck
transportation services to maintain and grow foreign market share.
Maritime press declared the AgTC as ``the principal voice of U.S.
agriculture exporters in transportation policy.'' Members are primarily
ag exporters and importers, also their forwarders, truckers, trade
associations, state commodity commissions, Departments of Agriculture.
The AgTC annually conducts Ag Shipper Workshops around the country,
culminating in the AgTC Annual Meeting--the nation's largest annual
gathering of ag international transport stakeholders.
Outline of Comments
1. We Cannot Take Global Demand for U.S. Agriculture For Granted
2. Role of the Federal Government--Congress, Executive Branch and
Agencies
a. U.S. agriculture exporters brought Congress and the
Administration together in a bipartisan way in 2022
b. There's More to Do to Improve the Ag Transport Supply
Chain
c. Intl. Shipments to Inland Rail Ramps Requires Federal
Regulatory Clarity
d. Infrastructure
3. Agriculture Export Supply Chain is Complex and Fragile--Case
Study
4. Conclusion
1. We Cannot Take Global Demand for U.S. Agriculture For Granted
There is virtually nothing in U.S. agriculture and forest products
grown or produced in this country that cannot be sourced or substituted
with products from elsewhere in the world; if we cannot deliver
affordably and dependably, both our foreign and U.S. customers can, and
have proven they will, shift their purchases to those other countries,
sometimes permanently. This has in fact occurred periodically, for
pork, beef, cotton, almonds, soybeans, fresh fruit, etc.
2. Role of the Federal Government--Congress, Executive Branch and
Agencies
There is a role for govt. to assure adequate supply of
transportation services. Federal and state policies and laws can and do
either facilitate the flow of ag commerce, or in a number of states,
hinder it.
a. U.S. agriculture exporters brought Congress and the Administration
together in a bipartisan way in 2022
Recently, Congress has been very active on ag transportation, last
year passing one of the very few, if only major pieces of legislation
to move through the U.S. Senate unanimously and passing the House
overwhelmingly three times--the Ocean Shipping Reform Act of 2022
(OSRA). While all importers and exporters benefit by OSRA, the primary
sponsors were Congressmen and women, bipartisan, on behalf of their ag
constituents--beef, pork, almonds, hay, lumber, cotton, etc.
There are significant requirements in OSRA designed to prevent or
alleviate significant unreasonable practices by the ocean carriers
which at times rendered U.S. agriculture an undependable and
unaffordable supplier to the world during the past few years of the
COVID supply chain crisis.
The Federal Maritime Commission is responsible to assure compliance
with the Ocean Shipping laws, and is now engaged in Rulemakings to
implement OSRA.
b. There's More to Do to Improve the Ag Transport Supply Chain
More is needed to improve the transportation supply chain, for
example, legislation has been introduced:
to make truck weights reasonable,
assure availability of truck drivers,
provide reasonable hours of service (driver hours);
Congress and the White House must continuously monitor and engage as
necessary to assure the labor-management disputes do not disrupt the
supply chain.
Rail: This past fall both the White House intervened to
prevent threatened national rail strikes; Congress was ready
with legislation if needed.
Port Labor: Currently the West Coast port gateways are
operating without a longshore labor contract in place, creating
uncertainty, and causing shift of carriers and cargo from the
West Coast ports to East and Gulf coast. Hopefully to be
resolved in coming months.
c. Intl. Shipments to Inland Rail Ramps Requires Federal Regulatory
Clarity
Currently, for international ocean shipping movements that
originate or end at inland locations, regulatory jurisdiction is
unclear. Thus, when a shipper is treated unreasonably by the railroad
of the ocean carrier for such an international shipment, does OSRA
apply subject to the Federal Maritime Commission regulation, or does
the Surface Transportation Board apply its own regulations? This
uncertainty is currently preventing exporters and importers from
gaining intervention and resolution of significant impediments to
efficient freight movement in those inland locations.
d. Infrastructure
The supply chain crisis of the past few years exposed deficiencies
in our infrastructure capacity. Ports nationwide were overwhelmed, as
were communities in surrounding areas. Inland rail ramps and
surrounding areas were also unable to handle the volume of trade that
was entering and leaving the U.S. West Coast ports need enlargement of
existing marine terminals, and building of new terminals, even
construction of entire new deep-water ports. Some are now being
proposed, seeking Federal infrastructure funding.
There must be continued expansion of inland rail depots, some
relatively near the seaports, to relieve the pressure on the marine
terminals at the seaports. There are many along the East Coast, but
more will be effective. More are needed along the Gulf Coast. In
comparison, the West Coast remains painfully and inexcusably lacking in
inland rail load points to serve the overwhelmed West Coast seaports.
They are desperately needed. It will require Class I railroads, short
line railroads, state and local governments, port authorities and
shippers to get these planned and built.
Road access is always needed, we hope the funding in the
infrastructure bills will provide necessary expansion.
3. Agriculture Export Supply Chain is Complex and Fragile--Case Study
The transportation of agriculture for international delivery is
complex and delicate. Let's take, for example, cotton, or grain, or
soybeans, or beef or pork, originating in the heartland. One can see
how many independent components, various transport modes--truck, rail,
rail ramps, marine terminals, cold storage facilities, chassis, ships--
are required, and how delay or shortage of any one, at any point, will
disrupt or prevent the flow of agriculture, from U.S. origins to the
foreign customer.
Truck to pick up empty ocean containers from a local or
regional rail-ramp (Presuming the ocean carrier has directed
the railroad to position those empty containers there--
sometimes requiring repositioning of empty containers hundreds
or more miles from a seaport or inland location to that
particular rail-ramp),
Truck to the inland production or packing facility,
Loaded, then trucked back to the rail ramps where they will
wait which can be days or weeks, for a train,
Loaded on railroad, then railed to the coastal seaport.
Then access to the marine terminals at the seaports, either:
by on-dock rail, onto the marine terminal. Then, when
ship arrives and is ready for loading, loaded on ship,
which departs for foreign destination.
or container is offloaded from the train at a rail
yard near the port, where it can sit for days or longer.
When the ship arrives, a trucker finds a chassis (the
trailer upon which the ocean contain sits when pulled by a
truck), of the same brand as designated by the ocean
carrier, which is brought to the rail yard; the container
is loaded on that chassis, the trucker then seeks an
appointment at the marine terminal to enter the gate (these
appointments are often not available). Trucker brings to
the terminal, can wait many hours or longer to enter. Then
the container goes to the ground in the terminal, to await
ship arrival and availability for loading.
Note: much agriculture travels from the heartland in
bulk rail `hopper cars', which arrive at near-port
`[transshipment]' facilities where the bulk commodity is
transferred into an ocean container, then, as described
above, loaded on a chassis, taken to the marine terminal,
etc.
Once loaded on ship it departs for foreign destination,
where most of the process above must be repeated, in reverse.
At any point in the supply chain described above, a delay
can occur, which then creates a crisis that extends throughout
the transportation plan, not only for the particular shipment,
but for all shipments of all shippers.
Refrigerated agriculture. If you think this is complex,
think about all our agriculture that requires refrigeration.
Special ocean containers with precisely controlled
temperature--frozen or chilled. Cold storage facilities near
the inland rail ramps or truck depots, cold storage at or near
the seaports. Reefer plugs on the marine terminals, and on the
ships, and at the terminals at the foreign seaport destination
. . . .
4. Conclusion
The Agriculture Transportation Coalition on behalf of all
agriculture and forest products members thanks the Committee for your
attention to and pursuit of transportation efficiency, which is
fundamental to U.S. agriculture viability.
The Chairman. Thank you, Mr. Friedmann, much appreciated.
Mr. Rosenbusch, please begin when you are ready.
STATEMENT OF COREY ROSENBUSCH, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, THE FERTILIZER INSTITUTE,
ARLINGTON, VA
Mr. Rosenbusch. Good morning, Chairman Thompson, Ranking
Member Scott, and Members of the Committee. My name is Corey
Rosenbusch. I am the President and CEO of The Fertilizer
Institute. TFI represents companies in the entire fertilizer
supply chain from manufacturers to distributors to retailers.
And we as an industry have recently taken center stage as the
spotlight has been shined on the important role that fertilizer
plays in food security. Half of all crop yields on this planet
are because of fertilizer use.
So I grew up in agriculture. My dad was an ag teacher and
an FFA advisor, so it was actually a pleasure to spend a great
part of the last year with farmers. And as the fertilizer
prices began to rise during harvest in 2021, I had a chance to
climb into a cotton picker with a farmer from my home State of
Texas. And yes, as you can imagine, he was quite concerned over
input costs. But at the same time, he understood that we are
experiencing high farm income and high crop prices. But not all
commodities had that same bump. I am sure you have heard that
from farmers in your district.
Fertilizer prices went from a period of historic lows just
a few years ago to record highs, and it was really that
volatility that was so impactful to the farmer. Fertilizer
materials are each very different products that are all
resource-dependent and are all very different markets. The
United States is fortunate to have significant production of
nitrogen and phosphates, but we import over 80 percent of our
potash from Canada. Globally, the United States only accounts
for about seven percent of total fertilizer production, and
over 90 percent of all fertilizer is actually used outside of
the United States.
So if you hear nothing else I say today, hear this.
Fertilizer is a globally traded commodity subject to global
supply-and-demand factors. So as we look at those global
supply-and-demand factors, you have to start with geopolitics.
We had Belarus that was sanctioned, removing about 20 percent
of global potash supply that they produce. You had China, the
world's largest producer of fertilizer, who restricted their
exports. You have Russia, who is the world's largest global
supplier of fertilizer, who also had sanctions from many
countries as the war broke out in the Ukraine, and Russia also
supplies much of Europe's natural gas. As a result, we saw
nearly 70 percent of all European nitrogen plants shuttered
during that period.
Natural gas is that key feedstock for all ammonia
production, but also the energy for ammonia, and that is the
building block for every nitrogen fertilizer product. It
accounts for about 70 to 90 percent of the production cost of
ammonia. And we saw natural gas prices reach over $100 per
MMBtu in Europe last August.
Fertilizer demand is also driven by crop prices, which we
have seen reached record highs. Global grain stock-to-use
ratios are the tightest they have been in 8 years, and it will
likely take years to rebalance those. Logistics has been a huge
issue for our industry. Over 60 percent of all fertilizer moves
by rail, and we have seen poor rail service that was compounded
by low water levels in the Mississippi River, reducing barge
traffic and, of course, trucking capacity issues as well.
Now, good news in recent months for the farmer is that
fertilizer prices have come down. Farmers have definitely taken
a wait-and-see approach as we approach the spring planting
season. European nitrogen plants have restarted. China has
slowly begun exporting product. Russia trade flows have shifted
and actually had a record year of exports last year. And
finally, we expect market fundamentals to remain in place for
the foreseeable future with high planted acres. Low grain
stock-to-use ratio and high grain prices means that fertilizer
demand will remain strong.
So if it is a global supply-and-demand issue, what can
Congress do? In the interest of time, I will refer to my
written testimony where we have outlined a number of policy
solutions for the Administration and for Congress. But I can
summarize those all by saying that fertilizer plants are
capital-intensive facilities, sometimes costing as much as $4
billion to build. So if one wanted to bolster fertilizer supply
for the American farmer, the most significant impact that you
can have to mitigate our biggest risk is to provide regulatory
certainty. Thank you.
[The prepared statement of Mr. Rosenbusch follows:]
Prepared Statement of Corey Rosenbusch, President and Chief Executive
Officer, The Fertilizer Institute, Arlington, VA
Good morning, Chairman Thompson, Ranking Member Scott, and Members
of the Committee.
My name is Corey Rosenbusch, President and CEO of The Fertilizer
Institute (TFI). TFI represents companies that are engaged in all
aspects of the fertilizer supply chain from manufacturers to
distributors to retailers. The fertilizer industry ensures that farmers
receive the nutrients they need to grow the crops that feed our nation
and the world. Half of all global crop yields can be attributed to
fertilizer use.
I want to thank the Committee and its members for the opportunity
over the last year to informally brief you on the complexity of
fertilizer markets. The roundtables, virtual presentations, and
meetings in your offices were tremendously helpful in educating you and
your staff on the volatility that we have experienced. While this may
be a review for some, I want to spend a few minutes reviewing the
factors that got us to this point; and I will then share an update for
the current market situation and outlook for the spring.
I grew up in agriculture as the son of an ag teacher and FFA
Advisor, and I spent much of the last year visiting with farmers to
hear about the stress that high input costs have caused. As prices
climbed during 2021's harvest, I climbed into a cotton stripper with a
farmer in my home State of Texas. While he was concerned about the
price of fertilizer, he also recognized he was experiencing record high
farm income and prices for cotton. But not all commodities experienced
that same bump, and I have no doubt that you have also heard from
farmers in your district about the high price of fertilizer. Adding to
the ``normal'' stress of farming, fertilizer prices were at historical
lows just a few years ago, followed by recent record highs. It has been
this extreme volatility that has especially impacted farmers' psyche.
Monthly Fertilizer Prices: Jan. 2007-Feb. 17, 2023.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: Weekly Prices Reported in Green Markets (A Bloomberg
Company).
While people often speak of fertilizer as a single product, there
are many fertilizer products. We often talk about fertilizer products
in terms of the three macro nutrients which are all essential for plant
(or crop) growth: Nitrogen, Phosphate, and Potash. They are each
different products with different markets. In the case of Nitrogen, you
have many forms or types of products that each have their own prices
and markets: Ammonia, UAN, Urea, and Ammonium Sulfate to name a few.
Global Producers--2021
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: International Fertilizer Association (IFA).
The United States has significant production of Nitrogen and
Phosphate fertilizers. We have some Potash production as well; however,
we import over 80% of our Potash from Canada. We also import Phosphate
and Nitrogen fertilizer from abroad. The U.S. only accounts for about
7% of global fertilizer production. Over 90% of all fertilizers are
used outside the United States.
Global Producers--2020
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: International Fertilizer Association (IFA).
If there is one thing you take away from my comments, it is this.
Fertilizer is a globally traded commodity, subject to international
pressures and geopolitical events. And it has been global supply and
demand that has led to the current market environment.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: International Fertilizer Association (IFA).
Market Background
Geopolitical events have been the biggest disrupter in recent
years.
Belarus is sanctioned out of the global market and that is
\1/5\ (20%) of the world's potash supply.
China is the world's biggest producer of fertilizers (nearly
30%) and a top global supplier (about 11% of all exports). Last
year, China imposed export restrictions on its fertilizer
products. Because China is a significant supplier to the
world's single largest buyer of fertilizer, India; this was
highly disruptive, distorted global markets, and raised costs
for farmers worldwide. India procures their fertilizer through
a centralized government buying tender that is then subsidized
before being sold to farmers.
The Russian war in Ukraine was also highly disruptive.
Russia is the biggest global supplier of fertilizers (about 20%
of global supply), and that supply chain was highly disrupted
at the onset of the war mainly because of sanctions imposed by
several nations. Russia also restricted Europe's natural gas
supply, which Europeans relied on for their fertilizer
production. This resulted in approximately 70% of European
nitrogen fertilizer production shutting down last year due to
high natural gas costs.
Natural gas is the key feedstock and energy source for ammonia
which is the building block of all nitrogen fertilizers. Natural gas
accounts for between 70% to 90% of the total ammonia production costs.
Natural gas prices doubled in the United States in 2022 and remain very
volatile. As mentioned, high natural gas costs shut down 70% of
European nitrogen fertilizer production.
Dutch TTB Natural Gas Futures Prices
(February 17, 2021, February 17, 2022-February 17, 2023)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: Investing.com.
Crop prices reached historic highs, and commodity demand and
plantings drive demand and prices for fertilizers. Crop prices were
strong last year, especially for corn, which accounts for 50% of
fertilizer demand in the United States. The biggest factor for
fertilizer demand is global grain stock-to-use ratios which TFI
understands are the tightest they have ever been, and it will likely
take years to rebalance.
Logistical supply chains were highly congested and challenged. More
than 60% of all fertilizer moves by rail. Fertilizer leans on rail more
than any other ag commodity, and rail service was terrible last year.
Beyond rail, there was some disruption from the low-water situation on
the Mississippi and trucking capacity remains constrained and was made
worse along the U.S.-Canadian border due to the cross-border vaccine
mandate.
Recent Market Updates
In recent months, fertilizer input costs have come down and supply
and demand have improved.
High prices last year led to demand deferral and resulted in
inventory carryover. This was especially the case for Phosphate and
Potash as farmers ``mined'' their soil. Excess inventory means
fertilizer demand has been soft in recent months as farmers ``wait-and-
see'' prior to spring.
European Nitrogen plants have restarted as natural gas prices have
moderated following a mild winter. China has been slowly exporting more
fertilizer. Russian supply disruptions have also mitigated as supply
patterns shifted, leading to a record fertilizer export year for
Russia. This shift in trade flows, however, also impacts prices.
Nitrogen fertilizer prices in the United States are significantly
lower than they were at this time a year ago, reflecting changes in the
global supply and demand balance rather than changes in the makeup of
the fertilizer industry, which has remained constant. For example, urea
prices in the United States have dropped by about 65% since March 2022.
Finally, TFI expects the market fundamentals to remain in place for
the foreseeable future. High planted acres, low grain stocks-to-use
ratios, and high grain prices means demand will likely remain strong
going into the spring.
What Can Congress Do?
While Congress can't control China or Russia, TFI has also
developed a roadmap of solutions that Congress can consider.
Fertilizer production facilities are capital intensive, typically
costing $1 billion to $4 billion to build. This means that domestic
producers and many others around the world must consider long-term
factors that can make or break the viability of these substantial
investments. Providing regulatory certainty is perhaps the most
significant impact that you can have on fertilizer markets.
A few of those include:
1. Potash and Phosphate should be placed on the government's list of
Critical Minerals.
2. We also need energy policies that support an abundant, safe, and
affordable supply of natural gas.
3. Permit reform is essential for mining, construction of new
production facilities, and for our infrastructure.
4. We need more reliable rail service, we need to promote driver
recruitment and retention for trucking, and we need
investments in our water and roadway infrastructure.
Congressmen Dusty Johnson and Jim Costa have some excellent
legislation, the SHIP-IT Act (H.R. 471), which helps a lot
on trucking.
5. Revamp current USDA conservation programs that empower retail
agronomists and CCAs to help farmers access these
resources.
Conclusion
Thank you again for the opportunity to be with you all this
morning. I am happy to answer any questions.
The Chairman. Mr. Rosenbusch, thank you so much for your
testimony.
And now, Mr. Twining, please begin when you are ready.
STATEMENT OF MICHAEL TWINING, VICE PRESIDENT OF SALES &
MARKETING, WILLARD AGRI-SERVICE; MEMBER, BOARD OF DIRECTORS,
AGRICULTURAL RETAILERS
ASSOCIATION, WORTON, MD
Mr. Twining. Good morning, Chairman Thompson, Ranking
Member Scott, and distinguished Members of the Committee. I
appreciate the opportunity to be here to testify before you
about the challenges facing American agriculture. My name is
Mike Twining. I serve as Vice President of Sales and Marketing
for Willard Agri-Service. Willard Agri-Service is a family-
owned and -operated independent retailer based just up the road
in Frederick, Maryland. We service growers in approximately six
states with crop protection, plant nutrition, and custom
application of those products, as well as robust decision
support tools to help them make decisions in this volatile
environment that enable them to farm more sustainably. I appear
also before you today as a member of the Ag Retailers
Association Board of Directors, which I am humbled to serve as
the Vice Chair of their Public Policy Committee.
The economic prosperity of ag retailers and the general
public is directly tied to the economic prosperity of farmers.
Only if they succeed, do we succeed. It is therefore in our
interest, as well as the interest of the nation and its
consumers, to have a solid safety net for producers.
First, I would like to address several regulatory burdens
affecting our industry. In the past couple of years, Federal
regulators proposed and finalized dozens of major rules that
impacted many sectors, including agriculture. Due to the time
limitations, I have only mentioned three of them today in my
oral testimony. However, many other examples are included in my
written testimony.
I would like to start with EPA pesticide registrations. It
is essential that the EPA have a scientifically justifiable,
predictable, and functioning process for pesticide
registrations. This is why we supported the PRIA legislation
(Pub. L. 117-328, Consolidated Appropriations Act, 2023) that
Congress passed last year. Uncertainty around what the rules
will be and what the products will be available, including
label changes too close to the start of season, complicates our
efforts as ag retailers to stock the products that farmers will
want and need, as well as our ability to use them safely and
effectively.
We commend EPA for proactively addressing the Endangered
Species Act, or ESA, compliance in its pesticide reviews.
However, EPA's recently released ESA Work Plan needs additional
modifications to ensure it does not cause severe disruptions to
American agricultural industries. Ag retailers and their
certified crop advisors, of which I am one, should be consulted
in developing pesticide mitigation measures, and working with
those experts should be accounted for in the EPA's picklist
scoring methodology. Care should be taken to provide local
options that work in each growing area and cropping system
because they are all unique. EPA must ensure stakeholder
engagement of end-users such as farmers, ag retailers, and
pesticide applicators for the products they regulate.
WOTUS, the new Waters of the United States, or WOTUS rule,
greatly expands the Federal Government's regulatory reach over
private land use and allows EPA to regulate ditches, ephemeral
drainages, and low spots on farmlands and pastures. None of
these features meet the definition of the word navigable waters
in the Clean Water Act, and the new rule impacts everyday
activities that farmers must do on their working lands.
Finally, energy. The Biden Administration's focus on
climate policy provides some ways that agriculture can
contribute significantly to solutions but has also created some
practical problems in implementation. Natural gas, which has
already been mentioned, which is an essential feedstock to
manufacture nitrogen fertilizer and is a co-product of shale
oil production, has seen pricing increases, leading not only to
fertilizer cost increases but volatility. Diesel fuel is used
every day and is a daily necessity for every ag retailer, grain
shipper, and farmer and has increased significantly in cost.
All inputs involved in the production of food have become
more expensive because of these policies. The price to feed and
fuel our country has risen as a result, something that every
American feels on a daily basis.
While my testimony this morning highlights some of the
negative effects the rural economy has had on the agriculture
community recently, I am encouraged by this Committee's goals
and priorities for this year. To that end, my written testimony
has several recommendations for Congress and the Administration
to consider. As a farm supply retailer, I am confident that
improvements in safety nets in the upcoming farm bill, free and
fair trade amongst agricultural producers and customers, an
all-of-the-above energy strategy, and changes to the regulatory
landscape currently hindering farm production will all
contribute to a once again burgeoning farm economy.
Thank you for your continued commitment to American
agricultural industry, and I look forward to your questions.
[The prepared statement of Mr. Twining follows:]
Prepared Statement of Michael Twining, Vice President of Sales &
Marketing, Willard Agri-Service; Member, Board of Directors,
Agricultural Retailers Association, Worton, MD
Introduction
Chairman Thompson, Ranking Member Scott, and distinguished Members
of the House Agriculture Committee. Thank you for the opportunity to
testify regarding the current challenges facing American agriculture.
My name is Mike Twining and I serve as Vice President of Sales &
Marketing for Willard Agri-Service, a family-owned ag retailer based in
Frederick, Maryland. We provide goods and services to farmers and
ranchers which include fertilizer (i.e., plant nutrition), crop
protection products (i.e., pesticides), custom application of
pesticides and fertilizers, development of nutrient management plans,
field scouting, soil testing, precision agricultural services, and much
more to help solve production problems and manage risks through the
life of their crops.
I also appear before you today on behalf of the Agricultural
Retailers Association (ARA). I currently serve on the ARA Board of
Directors and as Vice Chair of their Public Policy Committee. ARA is
the recognized unified national voice and trusted resource for
agricultural retailers and distributors. ARA unites its members and
their interests to advocate and educate on their behalf, provide
services to improve their businesses, and preserve their freedom to
operate and innovate, ensuring a safe and plentiful food supply for
all. ARA members are scattered throughout all 50 states and range in
size from small family-held businesses, farmer cooperatives, and large
companies with multiple outlets.
America's agricultural retailers, also known as farm supply
dealers, like other industries, have been hit hard by the volatile
economy we have witnessed over the past couple of years. There are a
growing number of factors that have led to this economic uncertainty
including substantially higher energy costs, higher crop input prices,
an unreliable transportation supply chain, increased regulatory
burdens, and disruptions in the global markets. Modern agricultural
technologies are essential for America's agricultural production for us
to continue providing safe, healthy, and affordable food, feed, fuel,
and fiber for the nation and the global economy. Our industry is being
asked to produce more for a growing domestic and global population with
less land, water, and critical inputs.
However, it's not too late for this Committee and Congress to act
in the best interest of American farmers and ranchers, the retailers
and distributors that supply them, and the rest of the agricultural
value chain which ultimately includes every American Citizen.
We believe Congress and this Administration needs to enact several
changes to strengthen the farm bill and provide economic opportunities
for America's agribusinesses to continue to thrive and grow.
The economic prosperity of agricultural retailers is directly tied
to the prosperity of the farmers we serve. Only if they succeed does
our industry succeed. It is therefore in our interest, as well as the
interest of the nation and its consumers, to have a solid safety net
for producers in the farm bill.
Farm Income Outlook
A recent forecast from USDA's Economic Research Service reported a
dim outlook for farm profits. The report, entitled USDA Agricultural
Projections to 2032, states that ``economic growth continues to
contract as high levels of inflation persist worldwide'' contradicting
statements from the White House in recent weeks touting decreasing
inflation. The USDA-ERS report goes on to say that ``persistent
inflation, severe weather events, supply chain disruptions, and high
input costs'' will continue to pressure commodity prices and net farm
income and net cash income are projected to decrease in 2023. I see
this reality every day as I work with growers who are struggling to
adjust to the unprecedented increases in costs, supply chain volatility
and obtaining operating capital to fund the inputs required to plant a
crop. In 2023, projected U.S. total agricultural exports decrease by
3.2 percent, while Agricultural imports are expected to be a record
$199.1 billion in 2023.'' \1\
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\1\ https://www.ers.usda.gov/webdocs/outlooks/105853/oce-2023-
01.pdf?v=6291.9.
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In addition to declining revenues, USDA-ERS predicts a decline in
crop cash receipts. In this kind of economic uncertainty for farmers
and the retailers supplying them, it is now more important than ever to
pass a multi-year farm bill reauthorization that provides for a
strengthened safety net. I fully expect your Committee will work
diligently to ensure these important issues are addressed when crafting
the upcoming farm bill authorization. I strongly urge the Committee to
fully review this forecast as it includes a broader outlook than the
items referenced in my testimony this morning.
Regulatory Burdens
First, I would like to address several regulatory burdens affecting
our industry. In the past couple of years, Federal regulators proposed
and finalized dozens of major rules that impacted many sectors,
including agriculture. I would like to highlight several today,
including some that fall outside the direct jurisdiction of this
Committee.
EPA Pesticide Registrations
Americans continue to have access to the safest, most diverse, and
most affordable food supplies in history. This is thanks in large part
to the efficiency, productivity, and innovation of U.S. agriculture
enabled by pesticides, fertilizers, seed protections, biostimulants,
and biotechnology products. These products are approved for use within
the United States' robust science- and risk-based regulatory system.
Agricultural retailers employ commercial pesticide applicators that
receive extensive education and training to apply pesticide products in
accordance with laws and regulations under the Federal Insecticide,
Fungicide and Rodenticide Act (FIFRA). EPA has financially supported
training of certified commercial applicators through state grants. The
programs generally cover Best Management Practices (BMPs) for safe
pesticide use as well as environmental issues like endangered species
and water quality protection. Thousands of agricultural retailers and
their commercial applicators have raised their professional status by
also participating in voluntary programs such as the Certified Crop
Advisor (CCA) program administered by the American Society of Agronomy
(ASA). I am a CCA and can speak directly to the rigorous and relevant
requirements to both obtain and maintain this certification. Our
industry is licensed and extensively trained to store, handle, and
apply Restricted Use Pesticide (RUP) products.
For healthy and productive growth of nutritious food, plants also
require essential nutrients. Fertilizers and bio stimulants serve as a
supplement to the natural supply of soil nutrients, build up soil
fertility to help satisfy the demands of crop production, and
compensate for the nutrients removed by harvested crops. Higher crop
yields are well documented with better crop and soil management.
Adopting nutrient stewardship contributes to the preservation of
natural ecosystems by growing more on less land with fewer inputs.
U.S. agriculture remains the leader in plant breeding innovation
due to clear, predictable, and science- and risk-based regulations.
Plant breeders continue to strive to provide solutions to new and
emerging challenges facing farmers, consumers, and the environment. Ag
biotechnology such as genetically modified organisms (GMOs) and gene
editing can help increase global food security. New innovations in
plant breeding provide benefits such as reducing CO2
emissions, dramatically increasing crop productivity, providing more
food to remote communities, reducing input load, and decreasing food
waste.
ARA is concerned by recent actions taken by the U.S. Environmental
Protection Agency (EPA) to revoke all tolerances for the insecticide
chlorpyrifos. We believe the actions by EPA are inconsistent with
Federal statutes, the agency's own extensive record on chlorpyrifos,
and sound, science-based and risk-based regulatory practices. This
action by EPA will cause significant harm to the food and agricultural
industries and directly impact supply chains. Other examples of
disruptions to the marketplace include the U.S. Court of Appeals for
the 9th Circuit ruling issued in June 2020 that canceled the
registration of three Dicamba herbicides for over-the-top usage in
registered crops. The Federal court decision was delivered in the
middle of application season, well after seed and pesticide product
selection decisions were made by American cotton and soybean farmers.
If EPA had not allowed for these products continued use during the 2020
growing season under their long-standing ``Existing Stocks'' policies,
there may not have been enough alternative products available for
agricultural retailers or their farmer customers. Congress and EPA need
to protect the agency's policy on ``Existing Stocks'' of pesticide
products if there are future cancellations to prevent severe
disruptions in the marketplace. These concerns are not unique to
chlorpyrifos. We have seen targeted campaigns to products such as
glyphosate, atrazine, and whole classes of rodenticides removed from
the market or severely restrict their uses.
It is essential that EPA have a scientifically justifiable,
predictable, and functioning process for pesticide registrations.
Consumers and the environment depend on it, and so do registrants,
farmers, and ag retailers. ARA along with other agricultural
stakeholders supported the Pesticide Registration Improvement Act
(PRIA) reauthorization legislation that Congress passed last December
that updates registration fees used to fund the Office of Pesticide
Programs (OPP) and increase the transparency between the agency and
industry. We support the bipartisan effort that enabled passage of this
bill and encourage the same collaboration to support the passage of a
well-designed farm bill.
EPA decisions must be based on quality scientific information to
which they have full access to the raw data and based on scientific
analyses that truly evaluate causal relationships beyond mere
correlation. Uncertainty around what the rules will be and what
products will be available, including label changes too close to the
start of the season, complicates our efforts to stock the products that
producers will want and need as well as our ability to use them.
Problems in this area have cost the industry a valuable insecticide in
chlorpyrifos for which there is no suitable replacement. In other
cases, label changes have been made to products that have been used
safely for decades with minimal justification or done after product
ordering and stocking decisions have been made by farmers and
retailers.
We commend EPA for proactively addressing Endangered Species Act
(ESA) compliance in its pesticide reviews. However, EPA's recently
released ESA Work Plan needs additional modifications to ensure it does
not cause severe disruptions to America's agricultural industry. Ag
retailers and their Certified Crop Advisors (CCA) should be consulted
in developing pesticide mitigation measures, and work with these
experts should be accounted for in the EPA's picklist scoring
methodology. It is important that mitigation options being provided
work in each growing area and cropping system. For example, practices
like strip tilling and diversion terraces do not make any sense in a
state like Florida. EPA must ensure stakeholder engagement of end-users
of the products they regulate. Agricultural retailers and their farmer
customers need to have a seat at the table and be allowed to have
meaningful opportunities to participate in the registration and re-
registration review process at the beginning, middle, and end of any
final decisions, including FIFRA label requirements that the pesticide
applicator will need to follow. ARA believes the following proposed
additional modifications need to be made to the EPA ESA Work Plan to
ensure it does not cause severe disruptions to America's agricultural
industry--
Evaluate New Pesticides and Account for Advancements in
Technologies--It is important for EPA to fully evaluate newer
chemistries, even if in the same class as some older
chemistries, as they may behave very differently--and may be
more likely to have a narrower spectrum of activity--than older
chemistries. EPA must NOT group pesticides in broad
classifications without evaluating and accounting for any
potential distinctions.
County-Level Bans are Ineffective, Inefficient, Overly Broad
Measures--EPA and the Services have put significant time and
effort into preparing science-supported biological evaluations
and have developed a new approach. For example, they have
concluded that county-level bans are ineffective, inefficient,
and overly broad measures that discourage growers from
proactively engaging on avoiding exposure to non-target
species. EPA should follow-suit and ensure that this is not an
option going forward. It is important that all stakeholders
focus on appropriate and effective solutions.
Local Certified Crop Advisor (CCA)/Agronomist Included as
Part of ESA FIFRA Label Mitigation Pick List--EPA is
implementing mitigation measures as a pick list that gives
pesticide applicators a choice to implement certain practices.
If this is part of EPA's process EPA moving forward, ARA
recommends that one of the main options included on the pick
list relates to farmers working with their local agricultural
retailer' agronomist/Certified Crop Advisor (CCA) to develop
pesticide mitigation measures. Agricultural retailers and their
CCA's are partners with farmers on the front lines of critical
decisions in agriculture to address pest concerns, sustainable
agricultural practices, and tight financial margins to produce
a crop.
Incorporate Agricultural retailers and other end-user input
to determine feasibility of mitigation measures along with
providing flexibility for the industry--Agricultural retailers,
commercial applicators, and their farmer customers must be
involved when EPA is considering mitigations measures. EPA must
ensure stakeholder engagement of end-users of the product.
Agricultural retailers and their farmer customers should have
meaningful opportunities to participate in the registration and
re-registration review process at the beginning, middle, and
end of any final decisions, including FIFRA label requirements
that the pesticide applicator will need to follow.
EPA and the Services must establish efficient processes to
complete the entire registration/consultation process--ARA
agrees with recommendations made by the Pesticide Policy
Coalition (PPC) that ``EPA must adopt more efficient approaches
to meeting its ESA obligation.'' EPA should adopt policies that
allow pesticide registrants to provide input on how best to
refine up-front mitigation measures based on additional data.
It is important for EPA and the Services to ensure registrants,
agricultural retailers, commercial applicators, and farmers are
involved in agency decision making at every major step of the
registration review process and label decision making process.
It is critical that the Services and the registrants,
agricultural retailers, commercial applicators, and farmers be
included in discussions with EPA at every major step of the ESA
consultation process to finalize mitigations before finalizing
FIFRA labels.
Prioritize development of programmatic consultations. All
parties to the pesticide registration process, from registrants
to regulators to end-users, could be well-served by developing
programmatic consultations on a pesticide-class basis
(herbicides, insecticides, etc.) that include practices which
might avoid jeopardy for all species. As we state above,
however, individual products, and especially newer chemistries
may behave differently, and be more likely to have a narrower
spectrum of activity than some older chemistries or otherwise
present a different potential risk profile. So, while
considering programmatic consultations, EPA assessments that
group pesticides together individual registration assessments
may need to evaluate and account for these distinctions.
Finally, ARA urges the Committee to include language in the 2023
Farm Bill reauthorization that codifies state oversight of pesticides
at the state level. 46 states have adopted some form of pesticide
preemption and are working cooperatively with local officials to
enforce robust oversight of state pesticide laws.
Ensuring that pesticides are properly regulated under the Federal
Insecticide, Fungicide, and Rodenticide Act (FIFRA) is imperative for
all our health and safety. Since the 1970s, state lead agencies have
worked with the U.S. Environmental Protection Agency (EPA) through
cooperative agreements to administer and enforce FIFRA laws and support
the development of scientifically based pesticide labels. State level
pesticide control officials are career employees with extensive
scientific training and are therefore best situated to prevent
pesticides from having adverse effects to the environment.
This targeted fix will ensure that those with expertise at state
lead agencies and EPA are the ones to determine pesticide usage and
protect the status quo of 46 states where robust oversight of
pesticides is already occurring. There is precedent for including
similar language in the farm bill, as demonstrated in H.R. 2 the
Agriculture Improvement Act of 2018 where the House included such
language in its initial 2018 Farm Bill. However, it was ultimately not
included in the final conferenced version signed into law on December
20, 2018. It is therefore important the language be included, and
remain in, the final 2023 Farm Bill. This bipartisan proposal is
supported by over 200+ national, regional, and state organizations with
membership throughout the United States.
WOTUS
The new Waters of the United States (WOTUS) rule greatly expands
the Federal Government's regulatory reach over private land use allows
EPA to regulate ditches, ephemeral drainages and low spots on farmlands
and pastures. None of these features meet the definition of the word
``navigable water'' in the Clean Water Act (CWA) as intended by
Congress. The new rule is likely to impact everyday activities such as
tilling, fertilizing, spraying, planting, and fence-building on ag
lands.
This new WOTUS rulemaking takes us away from the increased clarity
and predictability achieved in the Navigable Waters Protection Rule
(NWPR) and it also ensured states could enforce their own environmental
laws as intended using a cooperative federalism approach. EPA was
premature in moving forward with the new WOTUS regulations as the U.S.
Supreme Court is currently considering Sackett v. EPA, a Federal court
case that will answer the important legal question of whether the
``significant nexus'' test is appropriate to use when determining
jurisdiction of the EPA and Federal Government under the CWA. ARA
believes EPA and the Army Corps of Engineers should wait to implement
any new WOTUS regulations until the Supreme Court issues a decision in
the Sackett v. EPA case.
ARA strongly supports H.J. Res. 27, the WOTUS resolution of
disapproval under the Congressional Review Act (CRA) introduced by
House Transportation & Infrastructure Committee Chairman Sam Graves (R-
MO), Chair of the T&I Water Resources Subcommittee David Rouzer (R-NC),
along with senior Members of the House Committee on Agriculture. ARA
urges swift passage of this important proposal and send an important
message from Congress to the Biden Administration. A clean, safe, and
abundant water supply is a top priority for ARA, our members, and their
rural communities. This can be achieved with clear, concise, common-
sense regulations provided in NWPR.
Energy
The Biden Administration's focus on climate policy provides some
ways that agriculture can contribute significantly to solutions, but
also has created some practical problems in implementation. Natural
gas, which is an essential feedstock to manufacture nitrogen fertilizer
and a co-product of shale oil production, is now more expensive. Diesel
fuel, used to transport products across the nation and operate
agricultural equipment is significantly higher. Diesel is necessary for
every ag retailer, grain shipper, and farmer.
Diesel powered irrigation systems used to water our crops, plastics
used to contain crop protection products, and even the packaging used
by food producers, all have become more expensive because of these
policies. The price to feed and fuel our country has risen as a result.
ARA also support Federal policies that increase domestic energy
production, resulting in reduced costs for crop input materials
manufactured in the U.S. Our nation must remain energy independent by
including oil, natural gas, and other domestic energy supplies, such as
renewable fuels like ethanol and biodiesel, in our efforts to promote
economic growth in the nation's ag sector and reduce U.S. dependence on
foreign sources of energy. Overall, we support an ``all of the above''
energy strategy and believe this approach is necessary to support a
resilient food supply chain. Demand for oil and gas is increasing.
Congress and the Biden Administration must avoid policies that halt or
hold back increased domestic energy production such as development
onerous and duplicative regulations, restricting access to abundant
supplies of oil and gas located on Federal lands, permitting delays and
denials, and inconsistent environmental review standards, that cause
bottlenecks in the supply chain.
According to a recent study conducted by Environmental Health &
Engineering, Inc., ethanol reduces gasoline's greenhouse gas emissions
by 46 percent. Additionally, by 2022, USDA anticipates that corn
ethanol's relative carbon benefits could reach up to 70 percent thanks
to continued innovation in the ethanol process.
ARA issued a commissioned study in October 2020 entitled,
``Economic Impacts to U.S. Biofuels, Agriculture, and the Economy from
Subsidized Electric Vehicle Penetration.'' The study examined three
scenarios for electric vehicle (EV) market penetration through 2050 and
their potential impacts on biofuels consumption, the agricultural
sector, and the greater economy. The three scenarios include:
1. Base Case: EV market penetration increases to 13 percent of
light-duty vehicle sales by 2050, following Annual Energy
Outlook Reference Case projections.
2. ICE Ban by 2050: EV market share reaches 100 percent of light-
duty and freight vehicle sales by 2050 due to a ban on
internal combustion engines (ICE).
3. ICE Ban by 2035: EV market share reaches 100 percent of light-
duty vehicle sales by 2035 and 100 percent freight vehicle
sales by 2040 due to a ban on internal combustion engines.
These scenarios were selected to present a full range of possible
impacts across the biofuels value chain and supporting supply chains.
The biofuels value chain includes farm seed, fertilizer, and other
inputs required for crop production, maintenance, harvesting,
intermediate transportation, and biofuels manufacturing. The ICE Ban by
2050 and ICE Ban by 2035 scenarios were designed to represent scenarios
where non-market policy factors, including a potential ban on the sale
of vehicles with an internal combustion engine, could require EV
adoption. Relative to the Base Case, this study found that in 2050:
U.S. light-duty and freight vehicle consumption of ethanol
and biodiesel could decline up to 90 percent to 1.1 billion
gallons and up to 61 percent to 0.8 billion gallons,
respectively.
Corn and soybean consumption decrease by up to 2.0 billion
bushels and up to 470 million bushels, respectively.
Corn prices fall up to 50 percent to $1.74 per bushel.
Soybean prices fall up to 44 percent to $4.92 per bushel.
U.S. Net Farm Income decreases by up to $27 billion.
U.S. GDP declines by up to $26.4 billion, resulting in
cumulative GDP losses of up to $321 billion.
U.S. job losses could reach up to 255,300 in the year 2050.
These studies demonstrate that biofuels, like ethanol and
biodiesel, must continue to be critical pieces of a low-carbon economy.
According to the U.S. Energy Information Administration (EIA) biodiesel
is carbon-neutral because the plants (soybeans) that are the source of
the feedstock for making the renewable fuel absorb carbon dioxide
(CO2) as they grow. All forms of domestically produced
energy should be fully utilized to develop and promote low-carbon
emission vehicles as it will help keep energy, manufacturing, food, and
fuel costs low for American consumers and ensure economic prosperity
for America's domestic industries. For these reasons, we oppose efforts
to ban the internal combustion engine as it would have an adverse
impact on the U.S. agricultural industry and rural communities. ARA
also supports the Renewable [Fuel] Standards (RFS) and the year-round
sale of E15. Congress needs to restore the U.S. energy independence and
global leadership to ensure long-term economic growth and energy
security.
Labor
The agricultural community is dependent on a sustainable workforce
now more than ever. Every farm worker engaged in high-value labor
intensive crop and livestock production sustains an average of two to
three off-farm jobs. With the added burden of a global pandemic,
employers and employees are strained even further.
The current H-2A ag guestworker visa program is broken and only
available for part of the agricultural industry. Additionally,
agriculture needs the H-2A program to be more flexible as it currently
requires the cooperation of multiple Federal agencies which can
complicate the program.
Our economy is expanding quickly in response to the post COVID-19
business openings. Supply chains for consumer, industrial, and
agriculture businesses need to move more products in a short amount of
time and in higher volumes to keep pace with demand. Trucking demand is
outpacing the supply of available drivers. As noted above, road
infrastructure is important and truck deliveries are critical to keep
supplies on our retail shelves, raw materials to manufacturers, and
agriculture productive. A practical proposal with immediate results
would be to increase weight limits for trucks on roads to from June 30-
November 1 across the nation. Resupplying America would boost the
economy by ensuring raw materials and finished goods are in the right
place for purchase during this period of high demand.
Allowing higher payloads to resupply America's supply chains is the
right policy to consider because it would increase efficiency, reduce
costs, and lower emissions with fewer trucks in a short amount of time.
The increased weight on the roads would occur before most areas have
significant freezing and thawing. Increased inventory would be
available to consumers, easing price increases and providing inputs for
manufacturing and agriculture.
Seventy percent of the nation's freight is carried by commercial
trucks, yet as our economy strengthens, motor carriers have difficulty
sourcing the drivers they need to handle growing capacity. According to
a recent estimate by the American Trucking Association in 2021, the
driver shortage reached a record high of roughly 81,000, and that
number is only expected to grow to 160,000 drivers by 2031 absent any
changes to the status quo. In many supply chains, companies are being
forced to increase prices to account for higher transportation costs.
This will ultimately result in higher prices for consumers on
everything from electronics to food.
While 48 states currently allow drivers to obtain a commercial
driver's license at 18, they are prohibited from driving in interstate
commerce until they are 21. ARA supported the inclusion of the Safe
Driver Apprenticeship Pilot Program included in the ``Infrastructure
Investment and Jobs Act'' (IIJA) passed in the last Congress. This
program will allow 18 to 20 year old drivers to be trained as
commercial truck drivers and drive in interstate commerce. Commercial
trucks are now being outfitted with the latest safety technology
including active braking collision mitigation systems, forward-facing
event recording cameras, and automatic or automatic manual
transmissions. We currently use these technologies in our trucks at
Willard Agri-Service and I can attest to its effectiveness and
increased safe driving that occurs. We would like to hire qualified and
interested young people right out off high school and begin them on a
rewarding career. ARA is concerned with the restrictions being placed
on this new pilot program regarding the total available apprenticeship
slots (3,000). In addition, participating motor carriers are required
to be part of the U.S. Department of Labor-approved Registered
Apprenticeship Program (RAP) to be eligible. This late requirement,
which was not part of any provisions included by Congress when it
developed a carefully crafted this young driver apprenticeship program,
has prompted many motor carriers to decline participation in the
program. ARA believes the program should be expanded to include more
eligible drivers and the DOL requirement eliminated in order to
increase motor carrier participation.
The Farm-Related Restricted Commercial Driver's License (CDL), or
more commonly referred to as the ``Seasonal Ag CDL'' program, has been
an essential seasonal program for farm-related service industries since
1992. These industries have historically had a very strong
transportation safety record and it has not been diminished since these
Federal regulations have been in place. The Seasonal Ag CDL program has
helped promote economic growth for America's agricultural industries
serving the essential needs of farmers during the busy planting and
harvesting seasons. Due to challenging weather events, the increase in
crop production diversification, technological advances, and weight
increases in light duty pickup trucks and agricultural equipment over
the past several decades, it is necessary to modernize the Federal
regulations providing the framework for these state-administered
programs. The temporary shutdown of the state department of motor
vehicles offices throughout the nation during the height of the
[COVID]-19 pandemic also caused major disruptions for farm-related
service industries and their rural communities.
Please support additional reforms to the Farm-Related Restricted
CDL program with the following reforms:
Ensure Farm-Related Restricted CDL drivers can also operate
certain Class A commercial vehicles (excluding tractor-
trailers) in recognition of the advances and changes made to
light duty pickup trucks, agricultural equipment, and trailers
over the past 30 years.
Eliminate the requirement for in-person seasonal renewal of
the Farm-Related Restricted CDL.
There is a strong need for long-term modifications to this program
to ensure economic growth for our industries and their rural
communities while continuing to maintain a strong transportation safety
record. This essential seasonal CDL program is currently authorized in
24 states. The 2023 Farm Bill reauthorization offers an opportunity to
enact reforms that can help provide necessary transportation
flexibility for farm-related service industries and ensure there are no
disruptions to America's agricultural production and the supply chain.
The Hours of Service (HOS) agricultural operation exemption has
been vital for our industry to ensure ``just in time'' delivery of farm
supplies and other essential products and services to farm and ranch
customers. The electronic logging device (ELD) requirements highlighted
issues with the existing HOS regulations and the need to modernize the
agricultural exemption. While it has had the largest impact on the
livestock industry, there has also been an impact on farm supply
transporters and smaller trucking operations. To addresses these
issues, ARA requests support of legislation eliminating the HOS ag
exemption's planting and harvesting season provision. Over 30 states
already have a year-round ``planting and harvesting season''
designation. Eliminating this provision ensures the HOS ag exemption is
year-round for all states, promoting regulatory consistency and
alleviating unnecessary regulatory burdens highlighted by the ELD
mandate. We also request support for expanding the current air mile
radius of 150 air miles up to 200 air miles for farm supply
transporters following an FMCSA pilot program to collect safety data to
address continued industry consolidation and driver shortages.
In 2012, Congress included a new mandate that created a requirement
for Entry-Level Driver Training (ELDT). The new ELDT rule went into
effect in February 2022. This new requirement costs between $6,000 to
$8,000 per driver and possibly higher, depending on the trainer and can
take several days and up to 20 days to complete. ARA requests relief be
provided agricultural retailers and other agribusinesses relief from
these new Federal requirements as our industry continues to face a
growing driver shortage and higher operating costs. In the last
Congress, the Trucking Regulations Unduly Constricting Known Service-
providers (TRUCKS) Act was introduced. This common-sense legislation
would allow states to exempt employees of agriculture-related
industries and small businesses from the ELDT requirements to obtain
their CDL. Individuals may be faced with paying for these new training
requirements whether employed by a company or seeking employment,
creating an unnecessary barrier to entry into become a commercial truck
driver.
USDA agencies collaborate on their climate change and supply chain
polices due to their inherent linkage to the production of raw
agricultural commodities--the first step in the food and agricultural
supply chain and the most likely step to be impacted by climate change
policies. As an alternative to cropland idling climate change polices,
I urge USDA to prioritize Federal resources toward working land
programs to achieve large environmental and economic benefits by
incentivizing broader adoption of best management farming and ranching
practices.
I also support strengthening U.S. freight transportation policy and
infrastructure to help ensure there are many efficient ways for
agricultural commodities and products to flow throughout the
agricultural supply chain. The U.S. freight transportation system can
be strengthened through the following ways:
Adopt solutions to better balance the needs of ocean
carriers with the needs of our agricultural exports.
Support reauthorization of the Surface Transportation Board
(STB) and include provisions that foster increased competition
among freight railroads and other transportation modes,
increase shippers rights, provide better methods for
challenging unreasonable rail rates and require railroad
carriers to provide increased access to railroad service data
to enhance agricultural supply chain operations.
Increase motor carrier capacity through regulatory reform
and legislative change.
These regulatory changes will help our nation's freight continue to
move while preserving the safety of our highway and rail system.
Pro-Growth Economic Policies
The Agricultural Retailers Association sees a need to support and
advocate for pro-growth economic policies that will aid our members by
developing a more business-friendly marketplace in which to operate.
There are several barriers to entry within the American Tax Code we
would like to see changed to protect our freedom and license to
operate. These pro-growth policies will also positively impact our
nation's food supply chain and its resiliency.
Protecting current tax provisions is also paramount in promoting
growth. The estate tax has long been a detriment to our member's
business and, as such, we support its full repeal.
ARA also supports a workable sale and use tax collection system to
shield retailers and farmers from burdensome tax compliance
requirements and we continue to advocate for efforts to streamline
these requirements.
ARA recently signed onto a letter to Congressional leadership
regarding the need to preserve several tax provisions that would
support new and multi-generational farm operations, thus ensuring a
robust and dependable food supply chain. The letter noted that with
more than 370 million acres expected to change hands in the next 2
decades, tax policies will determine agricultural producers' ability to
secure affordable land to start or expand their operations. Highlighted
were three critically important tax provisions:
Stepped-Up Basis: Assets in agriculture are typically held
by one owner for several decades, so resetting the basis on the
value of the land, buildings, and livestock on the date of the
owner's death under a step-up in basis is important for
surviving family members and business partners to ensure the
future financial stability of the operation.
Like-Kind Exchanges: This provision allows businesses to buy
and sell like assets without tax consequences, thus helping
farmers and ranchers, who are typically ``land rich and cash
poor,'' maintain cash flow and reinvest in their businesses.
Sec. 199A Business Income Deduction: To maintain a
reasonable level of taxation for pass-through businesses, like
farms and ranches, it is critical to preserve Section 199A
business income deduction.
We also support a consistent corporate tax structure and oppose
changes to the current corporate tax structure. These provisions are
fundamental to the financial health of production agriculture and the
businesses that supply its inputs, transport its products, and market
its commodities.
ARA strongly advocates for the free and fair trade of agricultural
products, equipment, and crop inputs that are essential to food supply
chain resiliency. We believe this will create opportunities for
economic benefit for farmers, ranchers, retailers, and other members of
the supply chain. ARA members and their farmer customers purchase crop
inputs from both domestic and international manufacturers. ARA strongly
supports the domestic crop input manufacturing industry, and policies
that will make them more efficient and competitive globally. However,
our primary interest lies in achieving competitive sources of products
with which our retailer and distributor members can best serve their
grower customers.
We have consistently supported reducing both domestic and
international trade barriers. The agriculture industry is heavily
weather dependent; thus, to ensure a strong U.S. food supply, farmers
require large volumes of agriculture inputs during tight time spans
during the planting and harvest seasons. Hence, it is necessary for the
U.S. agriculture industry to have a strong and steady supply of crop
protection products and fertilizers available to ensure adequate supply
and to avoid wild price swings in the market. Our policy position
supporting fair and free trade of agricultural products is a top
priority that includes foreign and domestic manufacturers alike and
treats imports and exports equally.
Conclusion
While my testimony this morning highlights some of the negative
effects the rural economy has had on the agriculture community
recently, I am encouraged by this Committee's goals and priorities for
this year as well as actions taken in the last Congress to help improve
our supply chain and allow the nation to remain globally competitive.
To that end, we recommend the following supply chain solutions for
Congress and the Administration to act upon:
Reauthorization a Multi-Year Farm Bill that strengthens the
crop insurance program, promotes voluntary conservation
programs that allow for the continuation of working lands, CCAs
being automatically recognized as Technical Service Providers
(TSP) by NRCS, pesticide preemption, and increased ag research
funding.
All of the Above Energy Strategy that includes oil, gas, and
renewable fuels.
Add Phosphate and Potash to U.S. Critical Minerals List.
Support reauthorization of the Surface Transportation Board
and include reforms that promote increased competition and
provides increased shippers rights.
Increase the number of available commercial truck drivers
through an expanded Young Driver Apprenticeship (ages 18-20).
Implement additional Seasonal Ag CDL program reforms by
allowing on-line renewals and use of certain Class A Commercial
Vehicles for agribusinesses.
Hours of Service (HOS) pilot program for transporters of
farm supplies that are allowed to operate up to a 200 air-mile
radius.
Waive Jones Act requirements for agricultural shipping.
Remove [COVID]-19 vaccination border restrictions.
Implement National Environmental Policy Act (NEPA) Reforms
Protect use of essential pesticide products and other modern
ag technologies.
As a farm supply retailer, I am confident that improvements to
safety nets in the upcoming farm bill, free and fair trade amongst
agriculture producers and customers, and changes to the regulatory
landscape hindering farm production will all contribute to a once again
burgeoning farm economy.
The Chairman. Mr. Twining, thank you so much for your
testimony.
Mr. Brown, please begin when you are ready.
STATEMENT OF MIKE BROWN, PRESIDENT, NATIONAL CHICKEN COUNCIL,
WASHINGTON, D.C.
Mr. Brown. Chairman Thompson, Ranking Member Scott, and
Members of the Agriculture Committee, I want to thank you for
the opportunity to present testimony today. My name is Mike
Brown. I am the President of the National Chicken Council.
Today's hearing addresses a topic that is critically important
for the chicken industry: over-regulation that suffocates
rather than fosters a vital national industry.
The chicken industry is a model of American innovation and
efficiency. In fact, there is no more important food source in
America, I would argue, the world. Chicken is healthy,
sustainable, and affordable. Chicken supports millions of jobs
in thousands of rural communities. But overzealous and
misguided regulations threaten to take chicken off the table
for millions, and those most vulnerable would be first in line:
lower-income earners, children who receive free and reduced
school lunch meals, and needy individuals who rely on food
banks.
USDA is threatening to layer on another series of
unnecessary and financially ruinous regulations, and it is
critical we don't repeat past mistakes. First, USDA has
resurrected a 13 year old Packers and Stockyards Act rulemaking
that would stifle chicken production. Through a series of at
least three rules, USDA is proposing to greatly increase the
costs and legal risks involved in chicken grower contracting,
make it all but impossible to incentivize high-performing
farmers without bonus pay and eliminate the need to show injury
to competition. The 2010 version of these rules would have cost
the industry more than $1 billion.
Today, USDA has taken a unique approach. They have taken
those rules and they have broken them up into three rules. So
take the billion, divide by three, that is how they are costing
their rules. But 10 years ago versus today, you can imagine the
cost of what it is to raise birds, so we are probably well over
$1.5 billion with that particular rule.
Second, USDA is suggesting it might abandon a well-
established program allowing chicken processors to run at
certain speeds at their plants. This program dates back to the
Clinton Administration. It is bipartisan. Democratic
Administrations, Republican Administrations, Democratic
Administrations, and here we are. And to threaten to reduce
line speeds could have an incredible impact not only on the
prices that consumers pay, but also the number of birds that
growers can grow. And they are our most important asset, our
growers, though many of you hear differently.
Third, USDA has released a proposed framework that would
make Salmonella an adulterant in all raw poultry, an abrupt
change from longstanding USDA policy and court precedent. The
chicken industry has devoted tremendous efforts to controlling
Salmonella, and, on a per-consumption basis, rates have
decreased for raw chicken over the years. And as we all know,
proper cooking destroys Salmonella. USDA has presented no data
to justify its proposal. The technology does not exist to
implement a policy like this. And this policy would be
inconsistent with the Poultry Products Inspection Act (Pub. L.
85-172). But one thing is certain: Treating Salmonella as an
adulterant in raw poultry would lead to disastrous levels of
food waste, something I know that this Committee and Congress
and the Administration take seriously. All these regulatory
programs share two things in common: One, there is no
compelling justification for them; and two, they would drive
unprecedented levels of food inflation and food scarcity.
Mr. Chairman and Members of the Committee, the chicken
industry, the American consumers, and farmers have faced a lot
over the past several years. Chicken is the most important
protein in the world. Now is not the time to be layering on
additional regulations that further drain consumers, farmers,
and the chicken industry. Thank you for the opportunity to
present today. I know I have presented you with lengthy written
comments.
[The prepared statement of Mr. Brown follows:]
Prepared Statement of Mike Brown, President, National Chicken Council,
Washington, D.C.
Chairman Thompson, Ranking Member Scott, and distinguished Members
of the Committee on Agriculture, thank you for the opportunity to come
before you today to present testimony on the challenges facing American
agriculture. The National Chicken Council (``NCC'') is the national
trade association representing vertically integrated companies that
produce, process, and market over 95 percent of the chicken in the
United States. NCC members include allied industry firms that supply
necessary inputs and services for the chicken industry. Today's
hearing, entitled ``Uncertainty, Inflation, Regulations: Challenges for
American Agriculture,'' addresses a timely and critical topic, and NCC
appreciates the opportunity to participate.
Chicken processors' positive economic impact stretches from coast
to coast, hits every sector of the U.S. economy and is felt in every
Congressional district. We know that chicken is nutritious, affordable,
and versatile, but chicken also means jobs--whether it's on the farm,
in the processing plant, the transportation sector, manufacturing,
retail or restaurants. Companies that produce and process chicken in
the United States employ as many as 381,164 people across the country
and generate an additional 1,136,633 jobs in supplier industries,
including jobs in companies supplying goods and services to the broiler
industry.\1\ Broiler production is the primary economic driver of many
rural communities and the livelihood of thousands of small business
family farmers--in 2021, small family farms accounted for 47 percent of
U.S. poultry and egg output.\2\
---------------------------------------------------------------------------
\1\ 2022 Impact Report of the Chicken Industry, U.S. Poultry & Egg
Ass'n (Oct. 18, 2022), https://chicken.guerrillaeconomics.net/reports/
2e2ef9af-f1eb-40ca-a0ad-6b21c3e92c13; 2022 Poultry and Egg Economic
Impact Study Methodology, U.S. Poultry & Egg Ass'n (Oct. 18, 2022),
https://poultry.guerrillaeconomics.net/res/Methodology.pdf. To view the
economic impact of chicken in your state and district, visit
chickenfeedsamerica.org.
\2\ C. Whitt, et al., America's Farms and Ranches at a Glance, USDA
Economic Research Service (ERS) (Dec. 2022), https://www.ers.usda.gov/
webdocs/publications/105388/eib-247.pdf?v=9539.4.
---------------------------------------------------------------------------
Not only does the chicken industry create good jobs in the United
States, but the industry also contributes to the economy as a whole.
The broader economic impact flows throughout the economy, generating
business for firms seemingly unrelated to the chicken industry. Real
people, with real jobs, working in industries as varied as banking,
real estate, accounting, even printing all depend on the chicken
industry for their livelihood. In fact, in 2022, the industry was
responsible for as much as $417.04 billion in total economic activity
throughout the country, creating or supporting as many as 1,517,797
total jobs.\3\ The industry also generates sizeable tax revenues.
Nationally, the industry and its employees pay about $19.73 billion in
Federal taxes, and $5.78 billion in state and local taxes.
---------------------------------------------------------------------------
\3\ 2022 Impact Report of the Chicken Industry, supra note 1.
---------------------------------------------------------------------------
The U.S. broiler industry is the world's largest producer of
chicken. In 2021, U.S. farmers produced nearly 60 billion pounds of
broiler chickens valued over $30 billion.\4\ A portion of this product
is exported, and the United States is the world's second largest
broiler meat exporter, after Brazil.\5\
---------------------------------------------------------------------------
\4\ US Broilers: Production by Year, USDA ERS (April 28, 2022),
https://www.nass.usda.gov/Charts_and_Maps/Poultry/brlprd.php; U.S.
Poultry: Production and Value of Production by Year, USDA ERS (April
28, 2022), https://www.nass.usda.gov/Charts_and_Maps/Poultry/
valprdbetc.php.
\5\ 2021 Agricultural Export Yearbook, Poultry 2021 Export
Highlights, USDA Foreign Agricultural Service (April 14, 2022), https:/
/www.fas.usda.gov/poultry-2021-export-highlights.
---------------------------------------------------------------------------
Chicken is America's preferred protein, and Americans are on track
to consume over 102.4 pounds of chicken per person in 2023, more than
any other meat protein source.\6\ Moreover, at a time when food deserts
are commonplace and availability of nutritious food is a top concern
among consumers, chicken is the most available meat source in the
United States \7\ and is recommended by the U.S. Department of
Agriculture (USDA) Dietary Guidelines for Americans as a top
unprocessed, nutrient-dense protein source.\8\ The broiler industry and
its partners work hard to make sure consumers have a healthy protein
option available to them, doing our part to work towards addressing the
first pillar of the White House National Strategy on Hunger, Nutrition,
and Health--food availability and affordability.\9\
---------------------------------------------------------------------------
\6\ See USDA Economic Research Service, 2022 estimates and 2023
forecasts, Data Products, USDA ERS, https://www.ers.usda.gov/data-
products/.
\7\ In 2021, 68.1 pounds of chicken per person were available for
human consumption. Food Availability and Consumption, USDA ERS (Jan.
26, 2023), https://www.ers.usda.gov/data-products/ag-and-food-
statistics-charting-the-essentials/food-availability-and-consumption/
?topic
Id=080e8d1d-e61e-4bd8-beac-51f0f1d1f0fe.
\8\ Dietary Guidelines for Americans, 2022-2025, Ninth Edition,
USDA at 33 (Dec. 2020), https://www.dietaryguidelines.gov/sites/
default/files/2020-12/Dietary_Guidelines_for_Amer
icans_2020-2025.pdf.
\9\ Biden-Harris Administration National Strategy on Hunger,
Nutrition, and Health, White House (Sept. 2022), https://
www.whitehouse.gov/wp-content/uploads/2022/09/White-House-National-
Strategy-on-Hunger-Nutrition-and-Health-FINAL.pdf.
---------------------------------------------------------------------------
Our members may feed the nation and the world, but they are acutely
aware of their reliance on local talent and passion in the communities
they call home. Throughout the pandemic and 2020, chicken companies all
around the country gave back--and continue to give back--to their local
communities by making donations to food banks, soup kitchens, local
health care facilities, police, and fire stations. Every weekend, you
could find a company selling chicken at reduced prices right out of
trucks in the local community. In coordination with Meatingplace News,
NCC compiled a snapshot of NCC member community donations in 2020: \10\
---------------------------------------------------------------------------
\10\ Exhibit 1, NCC 2020 U.S. Broiler Chicken Industry
Sustainability Report (Sept. 2021) at p. 49.
---------------------------------------------------------------------------
2,540,000+ pounds of protein
$132,800,000+ million dollars
$981,000+ in grants
22,000,000+ meals
These data do not represent every commitment by every member, but
they provide a rough estimate of meals--and hope--delivered in what was
a challenging year.
Community support is but one of many factors driving sustainability
in the broiler chicken industry. For the chicken industry,
sustainability means being responsible stewards of land and water,
animal and feed management, our people, and communities into the
future. Flowing from this commitment, a lifecycle assessment of the
broiler industry found that, from 2010-2020: \11\
---------------------------------------------------------------------------
\11\ Id. at 13; Broiler Production System Life Cycle Assessment:
2020 Update, NCC, https://nccsite.wpengine.com/wp-content/uploads/2021/
09/Broiler-Production-System-LCA_2020-Update.pdf.
---------------------------------------------------------------------------
Land use decreased 13 percent
Greenhouse gas emissions decreased 18 percent
Water consumption decreased 13 percent
Fossil-based resource use decreased 22 percent
Particulate-forming emissions decreased 22 percent
At the same time these important reductions were being achieved,
the broiler chicken industry increased overall chicken production by
more than 20 percent.\12\ In other words, the chicken industry now
produces much more chicken using many fewer resources than in 2010. The
industry is committed to continuing to advance critical sustainability
goals in the years to come. I refer the Committee to the attached NCC
U.S. Broiler Chicken Industry Sustainability Report for more
information about the many steps being taken to advance sustainability
in our industry.
---------------------------------------------------------------------------
\12\ According to USDA's Economic Research Service, domestic
chicken production increased from 36.9 billion pounds in 2010 to 44.5
billion pounds in 2020, the same period covered by the lifecycle
analysis. See ``All Meat Statistics'' in Livestock, Dairy, and Poultry
Outlook: Livestock and Meat Domestic Data, USDA ERS (last updated Jan.
27, 2023), https://www.ers.usda.gov/data-products/livestock-and-meat-
domestic-data/livestock-and-meat-domestic-data/#All%20Meat
%20Statistics.
---------------------------------------------------------------------------
The chicken industry is a model of American innovation and
efficiency. The industry has only been able to be America's most
affordable, available, and nutritious source of protein by improving
its efficiency over many years. The efficiency of the broiler industry,
however, is increasingly threatened by overreaching and costly Federal
regulation that threatens to squeeze the chicken production process
from every direction. The results would be devastating: loss of jobs,
decimation of family farmers, fewer and more costly exports, and more
expensive chicken for American consumers.
NCC urges the Committee to take a critical look at the regulatory
barriers being erected around and within the chicken industry and to
determine whether they truly are in the interest of American farmers,
workers, and consumers. To illustrate the barriers being erected, the
harm they would cause across America, and the lack of any legitimate
societal benefit, my testimony focuses on three critically important
topics: chicken farmer contracting, processing plant line speeds, and
USDA's policy toward Salmonella in raw chicken.
USDA Is Proposing to Dismantle Chicken Contract Farming
Background on Chicken Contracting
The American chicken industry is the most competitive in the world.
This is no accident, but nor was it foreordained. Rather, the industry
is built on a grower compensation system--refined through decades of
innovation--that encourages farmers to raise healthy birds in an
efficient manner, relieves family farmers of many of the economic risks
otherwise inherent in farming, and ensures that hard-working farmers
are appropriately rewarded for their efforts.
To briefly describe the chicken contracting structure, broiler
integrators contract with independent farmers, often referred to as
``growers,'' to raise broiler chicks on behalf of integrators.
Integrators deliver broiler chicks to growers on the day the chicks
hatch. Growers raise the chicks into broilers using feed, veterinary
care, and other consultants like animal welfare experts that are
provided by the integrator. Growers are responsible for providing
quality housing, farm maintenance, on-farm inputs, and day-to-day care
of the broilers.
The system's fair, honest contracts provide a target pay that high-
performing growers can supplement by raising birds efficiently. In a
typical grow-out contract, growers and integrators agree on a pre-
determined target price per pound of weight gain based on an average.
The specifics vary, but growers are usually either paid the target plus
a bonus for high performance, or grower payments are adjusted slightly
upward or downward from the target based on relative performance.
Overall, regardless of the approach taken, growers earn a predictable
payment plus the opportunity to earn a bonus for strong performance.
This approach rewards skilled growers who have honed their management
practices to raise healthy birds most efficiently, and it ensures all
growers have a strong incentive to raise healthy flocks.
Properly cared-for birds experience optimal growth rates and have
lower mortality, both of which increase a grower's pay. This contract
structure makes the well-being of birds the integrator's and grower's
top priority because incentives are given to farmers who raise the
healthiest, highest-quality birds. Similarly, integrators have every
incentive to make sure their growers succeed and produce healthy,
quality birds, because the integrator is counting on those birds to
produce chicken meat. If an integrator sees a flock struggling or
identifies opportunities to increase efficiency, the integrator will
provide the grower with assistance through technical experts that are
familiar with the breed, business, and growing conditions to help the
grower maximize his or her potential.
As importantly, the poultry grower contracting system has evolved
to efficiently allocate economic risk to the parties best prepared to
burden it. In fact, data show that chicken companies remove
approximately 97 percent of the economic risk from growers as compared
to independent growers.\13\ Expensive and highly variable inputs such
as the broiler chicks, feed, and veterinary care are the responsibility
of the integrators, who can use their size to negotiate better terms
and can better absorb price shocks. Contract chicken farmers, for
example, do not need to worry about spikes in feed costs or deploy
complex grain-hedging strategies. And because they raise birds under
contract, they do not have to find a market for their flocks as they
mature, and they never face the risk of investing months in raising a
flock only to not be able to find a buyer. Meanwhile, contract growers
provide high-quality, day-to-day care, land, and housing for their
birds while being shielded from volatile input prices like feed. This
mutually beneficial partnership supports the economic viability and
independence of family farms by averting risk and promoting stable and
predictable income.
---------------------------------------------------------------------------
\13\ C.R. Knoeber & W.N. Thurman, ``Don't Count Your Chickens . .
.'': Risk and Risk Shifting in the Broiler Industry, 77 Am. J.
Agricultural Econ. 486, 496 (1995).
---------------------------------------------------------------------------
The data shows this contracting model is profitable and works well
for all parties. NCC commissioned an independent study using recent
chicken production statistics, which indicated that chicken contracting
relationships are mutually beneficial, successful, and profitable for
both growers and integrators.\14\ This study revealed several key
points:
---------------------------------------------------------------------------
\14\ T. Elam, Live Chicken Production Trends, FarmEcon, LLC (Mar.
2022), https://www.nationalchickencouncil.org/wp-content/uploads/2022/
03/Live-Chicken-Production-FARMECON-LLC-2022-revision-FINAL.pdf,
available as Appendix A to Exhibit 2, NCC Comments to Docket No. AMS-
FTPP-21-0044 Transparency in Poultry Grower Contracting and Tournaments
(Aug. 23, 2022).
Growers have voluntarily chosen to maintain long-term
relationships with their integrators. Most growers are in a
position to choose between partnering with two or more
processors and can readily cut ties with a bad business
partner. Over 50 percent of growers have been with their
current integrator for 10 years or more, a statistic unchanged
from 2015, with an additional 20 percent (for a total of 70
percent) having been with their current integrator for over 5
years.\15\
---------------------------------------------------------------------------
\15\ Id. at 3.
Growers rarely have their contracts terminated. In 2021,
only 0.7 percent of contract growers had their contracts
terminated.\16\
---------------------------------------------------------------------------
\16\ Id. at 5.
Chicken farming pays well. The median income for chicken
farmers exceeds the median income for farm households
---------------------------------------------------------------------------
generally, as well as for U.S. households broadly.
There is a long waitlist of people wanting to enter chicken
farming. In 2021, there were 1,672 applications from potential
growers and 335 expansion requests from existing farmers.\17\
---------------------------------------------------------------------------
\17\ Id. at 4.
Chicken farmers have very low loan default rates. The
deficiency percent and charge-off percent for poultry grower
loans amount to merely \1/3\ of the average agricultural loan,
---------------------------------------------------------------------------
based on Small Business Administration loan quality data.
These and other data reinforce what the chicken industry has long
known: chicken contract farming is a profitable, beneficial arrangement
that provides steady and reliable income to family farmers across the
country. A series of USDA proposed rules, however, threatens to
completely upend this model--a model that has made chicken the most
affordable protein in the market.
USDA's Proposed Rules on Chicken Contracting
In 2022, USDA revived a decade-old, abandoned rulemaking effort
that directly threatens this efficient, successful contracting system.
Although positioned as intended to promote competition and protect
growers, the proposals would, in reality, dismantle the very contract
farmer system that has proven so successful for all involved.
First, USDA issued a proposed rule titled ``Transparency in Poultry
Grower Contracting and Tournaments'' (``Tournament System Proposed
Rule'').\18\ Ostensibly positioned as a transparency initiative, this
proposed rule would impose substantial recordkeeping costs on chicken
companies, would require establishing complex and costly internal
auditing frameworks, and seems designed to greatly rachet up litigation
risk for integrators using the current grower contracting model.
---------------------------------------------------------------------------
\18\ 87 Fed. Reg. 34980 (June 8, 2022); see also Exhibit 2, NCC
Comments to Docket No. AMS-FTPP-21-0044 Transparency in Poultry Grower
Contracting and Tournaments (Aug. 23, 2022).
---------------------------------------------------------------------------
This proposed regulation would require integrators to make a
substantial number of disclosures at various points during the chicken
contracting process and to certify their accuracy, even for forward-
looking financial projections. For example, when entering a new
contract, integrators would have to provide detailed information about
past litigation; bankruptcy filings for all related entities; average
payments to all growers company-wide in the past year; average payments
to all growers at the complex for the past 5 years or, if that does not
reflect anticipated income, projected future grower income under the
contract; and information about grower-controlled costs outside an
integrator's control, such as utilities, fuel, water, labor, and
repairs and maintenance. A senior executive would have to certify the
accuracy of this information, including the forward-looking financial
projections. At chick placement, integrators would be required to
provide information such as stocking density, breed details, chicken
gender ratios, information about the breeder flock facility, breeder
flock age, information about health impairments, and how the integrator
would adjust payment based on these factors. At settlement, the
integrator would have to provide much of the same information, but for
all growers in the settlement pool. In addition to these disclosures,
the proposal would require integrators establish a costly ``governance
framework,'' complete with audits, testing, and document reviews.
Adding further uncertainty and raising the specter of yet more
rulemaking, USDA released a companion to the Tournament System Proposed
rule, an advanced notice of proposed rulemaking entitled ``Poultry
Growing Tournament Systems: Fairness and Related Concerns,'' \19\ which
requested information on dozens of leading questions about the current
chicken grower contracting process. Although USDA cited no example of
actual Packers and Stockyards Act (PSA) violations, the nature of the
questions strongly suggest USDA is considering engaging in yet more
rulemaking.
---------------------------------------------------------------------------
\19\ 87 Fed. Reg. 34814 (June 8, 2022); see also Exhibit 3, NCC
Comments to Docket No. AMS-FTPP-21-0046 Poultry Growing Tournament
System Fairness and Related Concerns (Sept. 6, 2022).
---------------------------------------------------------------------------
Following USDA's proposed rule regarding poultry grower contract
disclosures, USDA issued a second proposed rule under the PSA targeting
the broader meat and poultry industry and threatening more fundamental
changes to the broiler industry. The proposal, titled ``Inclusive
Competition and Market Integrity Under the Packers and Stockyards Act''
(``Inclusive Competition Proposed Rule'') \20\ would create a potential
cause of action for virtually any unequal treatment between two
growers, even if there were no actual harm to competition. For example,
the proposal would create a vaguely defined concept of a ``market-
vulnerable individual'' and prohibit nearly any unequal treatment of a
person on account of their being a market-vulnerable individual. The
proposal would define a broad swath of everyday business conduct as
retaliation, making it more difficult to terminate a contract or even
choose not to enter a contract in the first place. The proposal would
likewise expand the concept of deceptive practices and ban without
defining the use of ``pretexts'' in many contracting situations. As
with the Tournament System Proposed Rule, this proposal would impose
substantial recordkeeping burdens, requiring broadly that a company
maintain for 5 years ``all records relevant to its compliance'' with
the proposal, without actually defining what those records would be.
---------------------------------------------------------------------------
\20\ 87 Fed. Reg. 60010 (Oct. 3, 2022); see also Exhibit 4, NCC
Comments to Docket No. AMS-FTPP-21-0045 Inclusive Competition and
Market Integrity Under the PSA Proposed Rule (Jan. 17, 2023).
---------------------------------------------------------------------------
Third, USDA has signaled it intends to release a third proposed
rule, tentatively called ``Unfair Practices, Undue Preferences, and
Harm to Competition Under the Packers and Stockyards Act,'' \21\ which
we understand may attempt to reinterpret Section 202 so that it is not
necessary to prove injury to competition to establish a violation,
despite universal rejection of this position by every Federal court of
appeal to have heard the issue.
---------------------------------------------------------------------------
\21\ Unfair Practices, Undue Preferences, and Harm to Competition
Under the Packers and Stockyards Act (AMS-FTPP-21-0046), OMB Unified
Regulatory Agenda Fall 2022 (Jan. 4, 2023), https://www.reginfo.gov/
public/do/eAgendaViewRule?pubId=202210&RIN=0581-AE04.
---------------------------------------------------------------------------
Together, these three proposed rules, plus the further rulemaking
foreshadowed in the advanced notice of proposed rulemaking, threaten to
completely dismantle the existing chicken contracting system, impose
billions of dollars of regulatory cost on the industry, and expose
chicken processors to a flood of litigation. Ultimately, everyone will
suffer: consumers will face higher prices, the best farmers will see
their income go down, and chicken companies will have to absorb extreme
costs.
Fundamental Problems and Costs with USDA's PSA Proposals
At bottom, USDA's PSA proposals are an attempt to resurrect a
misguided rulemaking started in 2010 that was blocked by Congress and
later abandoned by USDA. The policies were unnecessary and costly then,
and they are even more so now. They would achieve nothing but driving
up the cost of putting wholesome, nutritious chicken on the dinner
table and making it more difficult to earn a living in agriculture.
Trial lawyers seem to be the only ones who would benefit.
USDA has positioned the set of proposals as intended to reduce
costs and foster competition, but nothing could be further from the
truth. Rather, the proposals would inject costs and heighten litigation
risk at every step in the chicken production process, discourage
innovation, and drive the best farmers out of chicken production. While
I am focused today on the impact these rules would have on the chicken
industry, they would also prove catastrophic for the beef, pork, and
turkey industries.
USDA stated the reason for the Tournament System Proposed Rule is
to help growers anticipate their income from broiler contracts and
reduce information asymmetries between integrators and growers. The
scope of the disclosures would not achieve that goal and would require
integrators to collect and disclose items like bankruptcy history,
litigation history, payment information for different regions, and
breeder flock information, that are entirely irrelevant for determining
how much income a grower might earn. Some of the information to be
disclosed would already be available in the public domain (e.g.,
bankruptcy history), while other information like that pertaining to
breeder information and grower payments, is competitively sensitive.
The proposal entirely overlooks factors inherent in the system that
protect against the hypothetical problems USDA is targeting with the
proposal. Integrators own the birds and need a consistent supply of
healthy birds to keep their processing plants operating at capacity.
Integrators already have every incentive to ensure they are placing
healthy birds, providing appropriate feed, and maintaining reputations
as good business partners. Further, many growers obtain financing from
agricultural lenders, who are experienced in reviewing chicken growing
contracts and evaluating their economic viability.
Most importantly, USDA's proposal would make it more difficult to
maintain the performance-based pay structure of grower contracts,
threatening the entire broiler industry. The sheer breadth of the
disclosures amplifies the litigation risk around every single grower
interaction, sharply raising the costs of using a performance-based
contract. Eliminating performance-based pay would eliminate any
incentive for a grower to put in the hard work and make the necessary
investments to raise high-quality flocks. This would compromise the
overall global competitiveness and the resources of the U.S. chicken
industry, shrinking the pool of revenue available to growers and
driving up costs while also further squandering our already limited
resources during a period of already historic inflation. The current
compensation system structure is an efficient and an effective means of
rewarding the best growers for performing above average and
incentivizing less-efficient growers to improve their performance.
USDA asserts the goal of the Inclusive Competition Proposed Rule is
to promote competition and market integrity in meat production and
enhance protections for vulnerable livestock and poultry producers. Not
only would the proposal fail to achieve these goals, it would
fundamentally alter and constrain the chicken production market to the
detriment of growers, consumers, and processors alike. The proposal
would have devastating effects on the grower contracting process,
resulting in increased costs to integrators making it more difficult to
fairly reward their contract farmers.
The proposed rule is rife with vague and undefined terms that fail
to clearly express what conduct is prohibited. Even the key term used
throughout the rule, ``market-vulnerable individual,'' is so broadly
defined that nearly anyone involved in the market could be a vulnerable
individual in one way or another. The proposal would make every
interaction between an integrator and a grower fraught with financial
peril, as any perceived differences in treatment could form the basis
for a lawsuit. In addition, the rule fails to provide virtually any
guidance on when conduct would be unlawful or how an integrator would
demonstrate its conduct reflected reasonable business decisions. A
chicken integrator acting in utmost good faith and ordering its affairs
in the most rational fashion in an effort to comply with the proposed
rule could not reasonably anticipate, much less determine with any
reasonable degree of certainty, what business practices would
ultimately be held illegal under these and other provisions.
Both proposed rules drastically underestimate their economic impact
at every possible opportunity. The rules fail to properly account for
the costs of contract renegotiations, the time required to implement
the extensive recordkeeping and record-retention systems, develop new
compliance policies, and implement an administratively complicated
oversight and compliance system, all of which require highly paid
professionals and substantial attorney time. Moreover, the proposals
would make contracting more difficult and could deter companies from
entering into new grower relationships, reducing overall economic
efficiency in the chicken production market, driving up consumer costs,
harming processors, and harming growers. The proposals would also drive
costly, frivolous litigation.
Both proposed rules pose substantial costs to growers with no
concrete added benefit. USDA estimated the 10 year aggregate combined
costs of the proposed Tournament System Proposed Rule to be $20.4
million, over half of which will fall on chicken growers, and NCC
believes this figure grossly underestimates the economic harm this rule
would inflict by deterring innovation and undermining efficiencies in
the contracting system. It would make it more difficult for integrators
to properly reward their best-performing growers, and top performers
could see their income drop and decide chicken growing is no longer the
right choice for them. Tellingly, USDA even recognizes that the
proposal would not actually help growers increase their incomes. In
other words, even with an understated economic impact analysis, USDA
could not show the proposal helps anyone. It simply makes chicken
production more difficult and more expensive for all.
The proposed Inclusive Competition Rule could be even more costly,
although USDA's economic impact analysis so understates costs as to be
meaningless. This proposal would turn every integrator-grower
interaction into a potential litigation flashpoint, forcing integrators
to carefully guard every word and evaluate every single grower-related
decision as one that could cost the company hundreds of millions of
dollars. It would have a tremendous chilling effect on new contracting,
as any deviation from the norm could be perceived as disparate
treatment in violation of the proposal. Integrators would be reluctant
to take on new growers, existing growers would see fewer opportunities
to expand their income, and it would become much riskier to sever ties
with poor performing growers who fail to properly care for their birds.
Integrators would have to develop massive recordkeeping and compliance-
monitoring systems. A dynamic economic system would stagnate, and these
lost efficiencies would be shouldered by consumers, growers, and
integrators. USDA's economic impact assessment in the proposed
Inclusive Competition Rule fails to consider these or virtually any
costs. Despite these economic realities, USDA concluded that this
proposed rule would cost companies a few hundred dollars a year, in
total. This estimate simply defies belief.
The third proposal, although yet to be released, could prove even
more economically devastating. Based on experience with the 2010
rulemaking, any attempt to make a regulatory end-run around the need to
show injury to competition when establishing a violation of Section 202
of the PSA would create tremendous confusion and uncertainty, injecting
billions of dollars of costs into the industry. The costs of this
proposal would likely be measured in the billions of dollars, with only
the trial lawyers coming out ahead.
Moreover, even assessing the potential costs of the proposals is
impossible because USDA has chosen to release these proposals in
piecemeal fashion instead of as a single rulemaking on livestock and
poultry contracting. This approach has made it nearly impossible for
industry to assess the true cost of these regulations and has almost
certainly resulted in low-balled cost estimates. By comparison,
independent economic analyses of previous USDA rulemakings on similar
topics have indicated economic impact costs in excess of $1
billion,\22\ and these were prepared 13 years ago, before unprecedented
inflation. USDA's PSA proposals could well have the same or greater
economic impact, but USDA's piecemeal approach has made it impossible
to evaluate.
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\22\ Scope of Sections 202(a) and (b) of the Packers and Stockyards
Act, 81 Fed. Reg. 92566, 92576 (discussing cost estimates prepared by
Thomas Elam and Informa Economics).
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The proposed rules also suffer from grave legal infirmities and
would inject tens of millions of dollars of litigation costs into the
industry, adding to the basic compliance costs and costs from
efficiency losses. The rulemaking records are devoid of any actual
instances of allegedly violative behavior to support such sweeping
burdens. The proposals are rife with vague, broad, and poorly defined
terms, subjecting companies to substantial uncertainty and staggering
litigation costs as the courts would be forced to define the terms USDA
declined to. Most troubling, both proposals completely overlook that,
as an antitrust law, Section 202 of the PSA is violated only if there
is a showing of injury to competition.
Every Federal circuit court of appeals to have construed Section
202 of the PSA has held that no violation of subsections (a) or (b)
occurs without a showing of competitive injury. Eight different
circuits have addressed the issue, and they have uniformly and
resoundingly affirmed this understanding.\23\ In surveying court
precedent, the Sixth Circuit noted the ``prevailing tide'' of circuit
court decisions holding ``that subsections (a) and (b) of 192 [PSA
202] require an anticompetitive effect,'' after which it concluded:
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\23\ Terry v. Tyson Farms, Inc., 604 F.3d 272, 276-79 (6th Cir.
2010); Wheeler v. Pilgrim's Pride Corp., 591 F.3d 355 (5th Cir. 2009)
(en banc); Been v. O.K. Indus., Inc., 495 F.3d 1217, 1230 (10th Cir.
2007); Pickett v. Tyson Fresh Meats, Inc., 420 F.3d 1272, 1280 (11th
Cir. 2005), cert. denied, 547 U.S. 1040 (2006); London v. Fieldale
Farms Corp., 410 F.3d 1295, 1303 (11th Cir.), cert. denied, 546 U.S.
1034 (2005); IBP, Inc. v. Glickman, 187 F.3d 974, 977 (8th Cir. 1999);
Philson v. Goldsboro Milling Co., 1998 WL 709324 at *4-5 (4th Cir.,
Oct. 5, 1998); Jackson v. Swift Eckrich, Inc., 53 F.3d 1452, 1458 (8th
Cir. 1995); Farrow v. USDA, 760 F.2d 211, 215 (8th Cir. 1985); De Jong
Packing Co. v. USDA, 618 F.2d 1329, 1336-37 (9th Cir. 1980); Pac.
Trading Co. v. Wilson & Co., 547 F.2d 367, 369-70 (7th Cir. 1976); see
also Armour & Co., 402 F.2d 712 (7th Cir. 1968).
The tide has now become a tidal wave, with the recent
issuance of the Fifth Circuit Court of Appeals' en banc
decision in Wheeler v. Pilgrim's Pride Corp., 591 F.3d 355 (5th
Cir. 2009) (en banc), in which that court joined the ranks of
all other Federal appellate courts that have addressed this
precise issue when it held that ``the purpose of the Packers
and Stockyards Act of 1921 is to protect competition and,
therefore, only those practices that will likely affect
competition adversely violate the Act.'' Wheeler, 591 F.3d at
357. All told, seven circuits--the Fourth, Fifth, Seventh,
Eighth, Ninth, Tenth, and Eleventh Circuits--have now weighed
in on this issue, with unanimous results.\24\
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\24\ Terry, 604 F.3d at 277 (lengthy string citation of supporting
cases omitted).
The Sixth Circuit became the eighth court to reach this conclusion,
and it did so in a case where USDA participated as an amicus and
directly argued that a showing of injury is not required for a Section
202(a) or (b) violation. The court expressly recognized USDA's
involvement, noted USDA's argument that the court should read Section
202(a) and (b) to not require a showing of injury to competition, and
pointedly concluded, ``We decline to do so.'' \25\
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\25\ Id. at 278.
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Despite being well familiar with this precedent, USDA through these
proposals would force the industry to once more bear the substantial
litigation costs to get the courts to again affirm that the PSA
requires a showing of injury to competition. These litigation costs are
not accounted for in the rulemakings at all.
These proposed regulations are even more troubling because no one
has asked for them, and in fact, Congress rejected similar rules
stemming from a 2010 rulemaking. USDA previously tried to read into the
2008 Farm Bill a mandate to circumvent the injury to competition
requirement and engage in far-reaching rulemaking on the PSA, Congress
reacted swiftly and clearly by preventing the agency from finalizing an
overly broad rulemaking for several years.\26\ Moreover, the 2014 and
2018 Farm Bills did not call for any new PSA rulemaking, and they
certainly did not indicate Congress supported attempts to read the
injury to competition requirement out of the PSA.
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\26\ See Consolidated and Further Continuing Appropriations Act,
2015, H.R. 83, 113th Cong. 731 (2014); Consolidated Appropriations
Act, 2014, H.R. 3547, 113th Cong. 744 (2014); Consolidated and
Further Continuing Appropriations Act, 2013, H.R. 933, 113th Cong.
742-43 (2013); Consolidated and Further Continuing Appropriations Act,
2012, H.R. 2112, 112th Cong. 721 (2011).
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Given this clear direction from Congress, USDA's attempt to read
the injury to competition requirement out of the PSA and to effectively
expand the PSA into a general anti-discrimination law raises a major
question requiring Congressional direction. As recently stated by the
Supreme Court in West Virginia v. EPA, in certain cases of ``economic
and political significance,'' an agency must demonstrate ``clear
Congressional authorization'' to exercise its powers.\27\ The PSA is a
hundred-year-old law, and at no point in its history has it been
applied to broadly address the type of conduct encompassed in the
Proposed Rule or to prohibit conduct that does not result in an injury
or the likelihood of injury to competition. Through the present series
of rulemakings, USDA seeks to completely upend animal production
contracting in the livestock and poultry industry. These sectors
account for more than $1 trillion of annual economic impact and touch
all fifty states, and they would be drastically affected by a change in
the injury to competition requirement, as well as by the other aspects
of the proposals. Any attempt to rewrite by regulation the PSA's injury
to competition requirement is the very definition of an issue of
``economic and political significance.'' USDA cannot take it upon
itself to dramatically expand the scope of such a longstanding statute.
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\27\ 142 S. Ct. 2587, 2613-14 (2022) (explaining that in certain
cases of ``economic and political significance,'' an agency must
demonstrate ``clear Congressional authorization'' to exercise its
powers); see also Nat'l Fed'n of Ind. Business v. OSHA, 142 S. Ct. 661
(2022) (per curiam) (rejecting the Occupational Safety and Health
Administration's claims of regulatory authority regarding emergency
temporary standards imposing COVID-19 vaccination and testing
requirements on a large portion of the national workforce); Ala. Ass'n
of Realtors v. HHS, 141 S. Ct. 2485 (2021) (per curiam) (rejecting the
Centers for Disease Control and Prevention's claims of regulatory
authority regarding a nationwide eviction moratorium).
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At bottom, these proposals reflect tremendous overreach by USDA
that promises to encumber a dynamic and innovative aspect of American
agriculture with massive amounts of red tape, administrative burden,
compliance costs, and legal risks, all for no tangible benefit.
USDA Is Threatening Chicken Processing Plant Line Speeds
USDA has recently initiated a process that threatens to reduce the
speed at which chicken processing plants may operate, despite decades
of experience showing higher processing line speeds are safe for food
and for workers.
Line Speeds in Chicken Processing
USDA regulations cap the speed at which chicken processing plants
may operate portions of their processing lines. In particular, USDA
regulations cap the speed at which plants can operate the part of the
line known in the industry as the evisceration line. The evisceration
line is where organs and other parts are removed and where chicken
carcasses are presented to a USDA inspector for visual inspection
before moving into the rest of the process. This is a highly automated
part of the production process, relying on carefully calibrated
automated equipment to move the carcasses through the process and to
perform the various tasks. These evisceration line speeds are
established not for worker safety, or even for a particular food safety
reason, but rather to make sure that USDA inspectors are able to
perform their carcass-by-carcass inspection, as required under the
Poultry Products Inspection Act. USDA has never regulated the speed at
which any other part of the chicken processing line may operate.
Currently, USDA regulations set the maximum line speed for chicken
evisceration lines at 140 birds per minute (bpm) for plants operating
under the modernized New Poultry Inspection System (NPIS).\28\ However,
USDA also has long operated a waiver program allowing plants to operate
at up to 175 bpm. This waiver system began with a trail program
announced in 1997 called the HACCP Inspection Models Project (HIMP),
which became a long-running trial to evaluate modernized inspection
systems. Under HIMP, 20 chicken processing establishments were allowed
to operate at higher evisceration line speeds of up to 175 bpm. The
HIMP trial formed the basis for USDA's NPIS regulations, and the HIMP
trial continued all the way until NPIS was finalized in 2014.\29\ But
because NPIS capped evisceration line speeds at 140 bpm whereas HIMP
plants had long operated at higher speeds, USDA created a new waiver
program that permitted former HIMP plants and, later, other NPIS plants
that met certain food safety metrics to operate evisceration lines at
up to 175 bpm. This waiver program was to form the basis for further
rulemaking to increase evisceration line speeds across the board, but
USDA has yet to issue such a regulation, and the waiver program
continues to this day.
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\28\ 9 CFR 381.69(a). These line speeds are for the USDA
inspectional system known as the New Poultry Inspection System, which
has become the most common system used in the chicken industry,
although USDA also provides inspection under other legacy inspection
systems with lower line speed limits.
\29\ Modernization of Poultry Slaughter Inspection, USDA Food
Safety and Inspection Service (FSIS), 79 Fed. Reg. 49566 (Aug. 21,
2014).
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Importantly, the HIMP trial and the line speed waiver program have
shown that running evisceration lines at 175 bpm does not compromise
food safety or worker safety.\30\ It does, however, let plants increase
processing capacity by 25 percent over the current 140 bpm limit. This
lets plants get much greater output from the same equipment,
substantially decreasing costs, increasing efficiency, and driving down
food prices for consumers. This efficiency is critical. Higher
production capacity means lower production costs for integrators, more
chickens for growers to raise, and lower prices for consumers. It is
also essential for ensuring U.S. chicken processors remain competitive
globally. Broiler chicken plants elsewhere in the world--including
South America, Asia, Canada, and Europe--are able to safely operate at
line speeds of over 200 bpm using the same equipment used in the U.S.
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\30\ A landmark 2001 study by the Research Triangle Institute (RTI)
reinforced what the industry and USDA had experienced with HIMP with
respect to food safety, finding that ``inspection under the new models
[HIMP] is equivalent and in some ways superior to that of traditional
inspection . . . and can maintain or even improve food safety and other
consumer protection conditions relative to traditional hands-on
inspection methods.'' Cates, et al., Traditional Versus Hazard Analysis
and Critical Control Point-Based Inspection: Results from a Poultry
Slaughter Project, J. Food Protection, 64(6), 826-832 (2001).
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Just as critically, evisceration line speeds do not affect worker
safety. Chicken processing plants can be divided conceptually into two
segments, commonly referred to as first processing and second
processing. The evisceration portion of the operation occurs in first
processing, which is the most highly automated portion of the
operation. Only about two percent of a typical chicken processing
plant's workforce is stationed in the evisceration area, and other than
the bird-by-bird inspection and sorting performed by the plant's
workforce, they are largely monitoring the operation of the equipment
and not directly interacting with the carcasses or machines. To
reiterate, the evisceration line speed limit applies only to the
evisceration portion of the line. After evisceration, chicken carcasses
pass the USDA inspection station, where USDA inspectors visually
inspect each carcass, and from there they move to the chilling system
to bring the product temperature down to refrigerated temperatures.
The majority of the labor involved in processing chicken occurs in
second processing, where birds are trimmed, deboned, and cut into
pieces. Plants use varying combinations of automated and manual
processes in second processing. Importantly, evisceration line speeds
have nothing to do with the rate of work in second processing. One
evisceration line feeds into multiple second processing lines, which
work at rates independent of the evisceration line. Chicken processors
adjust their second processing capacity by adding or removing second
processing lines or workers based on the planned production volume. If
the evisceration line is running faster, the processor will add more
workers on the line and/or increase the number of operating second
processing lines. If the evisceration line runs slower, fewer workers
or second processing lines may be needed. Therefore, line speeds and
work rates do not increase in second processing when evisceration line
speeds increase, but the number of workers needed does. Faster
evisceration line speeds thus translate directly into more jobs on the
second processing line.
Common sense says that faster evisceration line speeds do not
compromise worker safety. The data reinforces this. The chicken
industry has a long and successful track record of continual
improvement of worker safety. Department of Labor (DOL) Bureau of Labor
Statistics (BLS) data shows a continued decrease in injury and illness
rates in chicken plants. From 1994 (the oldest data available on the
BLS website) through 2019 (the most recent data without noise injected
by the COVID-19 pandemic),\31\ the total recordable poultry processing
illness and injury rate decreased from 22.7 cases per 100 full-time
workers per year in 1994 \32\ to 3.2 in 2019,\33\ a 91 percent
decrease. And the more than five-fold decrease in injury rates in the
poultry industry from 1994-2019 coincided with a period of substantial
increases in line speeds, bird size, and automation. Technological
improvements in processing tend to correspond to safer workplaces.
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\31\ During the COVID-19 pandemic, COVID-19 illnesses among plant
employees were typically treated as recordable illnesses, regardless of
where or how the worker got sick. As with many public health measures,
the COVID-19 pandemic has injected considerable noise into the data,
and so a truer comparison can be obtained by looking at the most recent
pre-pandemic data.
\32\ Industry Injury and Illness Data--1994, U.S. Bureau of Labor
Statistics (Feb. 1, 2023), https://www.bls.gov/iif/nonfatal-injuries-
and-illnesses-tables/soii-summary-historical.htm#94
Summary_Report.
\33\ Industry Injury and Illness Data--2019, U.S. Bureau of Labor
Statistics (Feb. 1, 2023), https://www.bls.gov/iif/nonfatal-injuries-
and-illnesses-tables/soii-summary-historical.htm#94
Summary_Report.
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The effects, or lack thereof, of line speed waivers can be better
isolated by comparing worker safety data from 2014, the year NPIS was
finalized and before line additional line speed waivers were issued,
and 2019, by the end of which 34 chicken processing plants were
operating under line speed waivers. In 2014, the total recordable case
rate among chicken processing plants was 4.3 cases per 100 full-time
workers.\34\ In 2019, it was 3.2. Despite nearly three dozen plants
operating under line speed waivers, overall worker illness rates
continued to decrease during this period.
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\34\ Industry Injury and Illness Data--2014, U.S. Bureau of Labor
Statistics (Feb. 1, 2023), https://www.bls.gov/iif/nonfatal-injuries-
and-illnesses-tables/soii-summary-historical.htm#94
Summary_Report.
---------------------------------------------------------------------------
USDA's Line Speed Study
Despite more than a quarter century of experience with higher line
speeds, USDA has embarked on a vaguely defined, open-ended study of the
effects of chicken processing evisceration line speeds on worker safety
as a condition for deciding whether to continue the program.\35\ In
response to a lawsuit by labor activists,\36\ USDA decided to condition
plants' ongoing eligibility for line speed waivers on those plants
agreeing to participate sight unseen in an undefined worker safety
study by third-party contractors engaged by USDA. As part of this
study, plants were asked to submit voluminous quantities of worker
safety data to USDA, required to allow third-party researchers
unfettered access to processing plants, and made to agree in advance to
participate in a more rigorous onsite visit yet to be defined.
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\35\ Constituent Update, USDA FSIS (July 29, 2022), https://
www.fsis.usda.gov/news-events/news-press-releases/constituent-update-
july-29-2022.
\36\ United Food and Commercial Workers Union, Local N. 227, et al.
v. USDA, Case No. 1:20-cv-02045 (D.D.C.). NCC joined this case as an
intervenor to ensure the interests of NCC member companies were
appropriately represented.
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This reflects a dramatic regulatory overreach, using plants'
reliance on discretionary evisceration line speed waivers from a food
safety agency as leverage to force participation in a worker safety
study outside USDA's mission area. Chicken processors were required to
commit to participate in the study without seeing nearly enough details
to understand what it entailed. Even now, the study protocol has yet to
be released. But declining would mean cutting processing capacity by 20
percent, which could be financially ruinous for a company and all those
who depend on it for their livelihoods. The data requests are broad,
ill defined, and burdensome. Some of the requested data includes
sensitive medical information that even the DOL's Occupational Safety
and Health Administration (OSHA) is prohibited from accessing without
special safeguards. The onsite visits by the third-party contractors
have focused almost entirely on second processing, which as explained
is entirely unrelated to evisceration line speeds. And questions have
arisen whether some of the third-party contractors, who have
participated in court cases adverse to chicken processors, are
appropriate participants in this study. Even though USDA announced this
study in July 2022, the agency has yet to provide any information about
the actual study protocol, timing, endpoints, or how the agency plans
to use the study to inform policy development and rulemaking. The
result has been widespread confusion, significant cost and time spent,
and tremendous uncertainty about the future of evisceration line speeds
in the chicken industry. This uncertainty has prevented companies from
making informed long-term investment decisions for their own processing
plants as well as what grow-out capacity they will need from their
contract growers.
None of this was necessary. USDA itself decided to conduct this
study; no party in the litigation compelled this action. As explained,
there has been a tremendously long history of experience with elevated
line speeds, in both the United States and other countries. The 20
plants that participated in the HIMP trial were closely scrutinized for
decades, yet no worker safety issues emerged. Nor have worker safety
issues emerged in the years since USDA began issuing line speed waivers
under NPIS. Instead, recordable illness and injury rates in the chicken
industry have steadily decreased, regardless of how fast evisceration
lines are operating. Other countries, including Canada and many in
Europe, have long permitted chicken processors using the same equipment
to run much fast than even 175 bpm, with no negative effects on worker
safety.
Through sister agencies in DOL, USDA could have easily accessed
detailed information about plants' worker safety history, including
plant-level illness and injury rates, and compared that information
across time as plants transition to line speed waivers and between
plants with and without line speed waivers. USDA has never explained
why it decided it was necessary to use its economic leverage to compel
plants to participate in an ill-defined study conducted by third
parties on a topic well outside USDA's mission area instead of simply
asking its sister Federal agency directly responsible for worker
safety, DOL, to share or analyze the relevant information already in
DOL's possession.
As a result, USDA has injected tremendous economic uncertainty into
the chicken industry. Chicken companies that have invested heavily in
installing new equipment and reconfiguring lines to run at 175 bpm have
no idea whether the program will continue or their investments will
evaporate overnight. This uncertainty makes it very difficult for
companies to plan, and it deters investment in modernized equipment and
plant expansions. If line speed waivers were revoked and plants forced
to operate evisceration lines at 140 bpm, the economic effects would be
catastrophic. Industry capacity would drop dramatically, jobs in second
processing would be lost, rural communities would lose their economic
engines, chicken farmers would have fewer birds to raise and see their
earnings plummet, export competitiveness would drop off, and consumers
would have to pay more for chicken. NCC urges Congress to ensure
chicken processing line speeds are protected and that line speeds are
expanded so that all chicken processors can run at the line speeds we
already know are safe.
Potential Policy Changes Regarding Salmonella in Raw Chicken Risk Food
Security
The final item I wish to raise for your attention is USDA's
proposal to dramatically shift its policy toward Salmonella in raw
chicken, which risks drastically affecting food security, food
availability, and consumer prices. In October 2022, USDA announced a
proposed Salmonella Framework that signaled a fundamental change in how
the agency might regulate Salmonella in raw poultry.\37\ Similarly, in
a speech last summer, Deputy Under Secretary for Food Safety Sandra
Eskin announced that USDA intended to declare Salmonella as an
adulterant in a very specific category of breaded and stuffed chicken
products that are sold frozen and not fully cooked, such as chicken
cordon bleu. Although the Salmonella Framework raises a number of
issues of concern, I will focus primarily on USDA's suggestion that it
might declare Salmonella an adulterant in raw poultry.
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\37\ See Proposed Regulatory Framework to Reduce Salmonella
Illnesses Attributable to Poultry, USDA (Oct. 14, 2022), https://
www.fsis.usda.gov/inspection/inspection-programs/inspection-poultry-
products/reducing-salmonella-poultry/proposed (noting in ``Component 3,
Enforceable Final Product Standard,'' that USDA is considering
implementing a final product standard regarding Salmonella in raw
poultry products); see also Exhibit 5, NCC Comments to Docket No. FSIS-
2022-0029 Proposed Salmonella Framework (Dec. 16, 2022).
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Background on Salmonella in Chicken
The U.S. food supply is the safest in the world, and food safety is
a top priority for the broiler chicken industry. NCC members are
committed to continuing to enhance their food safety systems, and NCC
works continuously with USDA to improve the control of pathogens in
chicken products and to address other food safety issues. This is a
shared challenge and a shared commitment. NCC supports food safety
regulations that are based on sound science, robust data, and are
demonstrated to positively impact public health. Americans eat 150
million servings of chicken every day, and nearly all of them are eaten
safely. But NCC members want every meal to be safe, and our members
continue to work to drive down foodborne illness.
For years the industry has implemented a multi-hurdle approach
focused on the continual reduction of Salmonella from farm to fork--
implementing robust vaccination, biosecurity, sanitation, and other
effective measures. In just the past few years, USDA has significantly
tightened existing Salmonella standards; introduced new performance
standards for chicken parts; rolled out a new, scientifically driven,
modernized poultry inspection system that allows for greater testing
and analysis; released detailed guidance on controlling Salmonella
through processing controls; and approved numerous new interventions;
among many other endeavors. This approach has been enormously
successful. Based off the most recent USDA testing results,\38\
Salmonella prevalence on young chicken carcasses is 3.1 percent and
Salmonella prevalence on chicken parts is 7.1 percent across all
broiler processing establishments. These testing results are well below
the Salmonella performance standard for both young chicken carcasses
and chicken parts. Currently over 90 percent of the industry is meeting
or exceeding the USDA performance standard for both young chicken
carcasses and chicken parts.\39\
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\38\ Sampling Results for FSIS Regulated Products, USDA FSIS
(2022), https://www.fsis.usda.gov/science-data/sampling-program/
sampling-results-fsis-regulated-products.
\39\ Salmonella Verification Testing: October 31, 2021 through
October 29, 2022, USDA FSIS (2022), https://www.fsis.usda.gov/news-
events/publications/salmonella-verification-testing-october-31-2021-
through-october-29-2022.
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On a per-consumption basis, chicken is safer than ever. While the
overall incidence of salmonellosis in people has remained relatively
unchanged since the Centers for Disease Control and Prevention (CDC)
starting tracking it using the FoodNet Fast system in 1996, Americans
eat significantly more chicken and chicken products today than in 1996.
In 1996, chicken consumption in the U.S. was 69.7 pounds per person.
USDA estimated that Americans would consume 102.4 pounds of chicken per
person in 2023.\40\ This reflects a 42 percent increase in chicken
consumption over the past 26 years, with no increase in salmonellosis.
This means that on a per-consumption basis, salmonellosis illness rates
attributable to chicken have dropped significantly over the past 26
years. This is an important point that sadly has been overlooked in how
USDA has talked about Salmonella in recent years.
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\40\ Data Products, USDA ERS, https://www.ers.usda.gov/data-
products/; see also World Agricultural Supply and Demand Estimates,
USDA (Dec. 9, 2022), https://www.usda.gov/oce/commodity/wasde/
wasde1222.pdf.
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This data shows that USDA's existing framework for approaching
Salmonella control has been working, and NCC has encouraged USDA to
continue using the latest science and industry-Agency collaborations to
drive improvements in this framework. For example, science-based
changes such as transitioning to an enumeration-based performance
standard would apply new technological and scientific developments to
USDA's proven approach and would drive continued food safety
improvements.
Issues with USDA's Proposed Salmonella Framework
The proposed Salmonella Framework would abandon tried-and-true
approaches for legally infirm and technologically infeasible strategies
with no clear supporting data. Under the proposed Salmonella Framework,
USDA has telegraphed its intent to declare Salmonella an adulterant in
raw poultry when Salmonella is present above certain yet-to-be-
specified levels. Such an approach would be a dramatic and unwarranted
departure from USDA's longstanding approach toward Salmonella in raw
poultry, an approach that has been recognized by the courts and
supported by science. Critically, despite releasing the proposed
Salmonella Framework last October, USDA has still yet to provide any
scientific data supporting its proposed approach. The lack of data
supporting a considered approach is especially troubling given the
grave consequences the approach contemplated in the Salmonella
Framework would have on food availability, food prices, and food
security.
The Salmonella Framework appears premised on legally infirm
conclusions that Salmonella may be considered an adulterant in raw
poultry. Under the Poultry Products Inspection Act (PPIA), a product is
adulterated if it ``bears or contains any poisonous or deleterious
substance which may render it injurious to health.'' \41\ The statute
notes, however, that for substances that are not added, ``such article
shall not be considered adulterated . . . if the quantity of such
substance in or on such article does not ordinarily render it injurious
to health.'' \42\ Thus, for naturally occurring substances, the
pathogen is an adulterant only if the substance is present in
quantities that ``ordinarily'' render the product injurious to health.
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\41\ 21 U.S.C. 453(g)(1).
\42\ Id. (emphasis added).
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As USDA has consistently recognized, Salmonella is not an
adulterant in raw poultry because it is not an added substance and
occurs naturally within the chicken biome. Salmonella can exist in a
chicken's skin, muscle tissue, and gut, and healthy, asymptomatic birds
are known to carry Salmonella.\43\ As USDA has also consistently
recognized, Salmonella is not present in levels that ordinarily render
chicken injurious to health because customary cooking practices call
for thoroughly cooking raw chicken, which destroys any Salmonella that
may be present. Cooking raw chicken to an internal temperature of 165
F achieves a 7-log reduction in Salmonella.\44\
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\43\ See, e.g., Erol, et al., Serotype distribution of Salmonella
isolates from turkey ground meat and meat parts, Biomed Res. Int. 2013,
281591 (2013); Nde, et al., Cross contamination of turkey carcasses by
Salmonella species during defeathering, Poult. Sci. 86, 162-167 (2007);
Rigney, et al., Salmonella serotypes in selected classes of food animal
carcasses and raw ground products, January 1998 through December 2000,
J. Am. Vet. Med. Assoc. 224, 524-530 (2004).
\44\ FSIS Cooking Guidelines for Meat and Poultry Products (Revised
Appendix A), USDA FSIS, Table 3, https://www.fsis.usda.gov/sites/
default/files/media_file/2021-12/Appendix-A.pdf.
---------------------------------------------------------------------------
USDA has suggested it plans to approach Salmonella in raw chicken
similarly to how it approaches certain strains of E. coli in raw ground
beef. But there are critical differences between the two. Unlike with
ground beef, consumers have long customarily cooked chicken in a manner
that achieves thorough cooking and destroys Salmonella. Chicken is
customarily cooked through. Consumers are regularly reminded to use a
meat thermometer to cook chicken to an internal temperature of 165 F--
including on the package itself--which achieves lethality. While NCC's
strong recommendation is that consumers use a meat thermometer, other
less analytical ways to gauge ``doneness,'' such as cutting into the
meat to see if it is visibly white and firm, are also highly likely to
achieve lethality and certainly cannot be said to ``ordinarily'' result
in the product being injurious to health. Chicken is not customarily
cooked ``rare'' or ``medium,'' and waitstaff at restaurants do not ask
patrons how they would like their chicken cooked because the default
approach is to cook chicken all the way through. Certainly, it is not
the case that due to handling and cooking practices, Salmonella
``ordinarily'' causes the chicken to be injurious to health.
USDA has offered no information supporting a change in its
longstanding position that Salmonella is not an adulterant in raw
chicken. The proposed Salmonella Framework is nearly devoid of data,
and USDA has not provided any scientific information to support this
change in classification, including risk assessments, product testing,
or scientific analysis. Nor has USDA provided any data to indicate why
it has floated the idea of setting its adulteration threshold at one
colony forming unit (cfu) per gram, or why this would be appropriate
for all forms of raw chicken. This is regrettable, as without
supporting data, the proposed Salmonella Framework appears almost
entirely speculative. What data is available suggests that
salmonellosis cases attributable to chicken consumption are actually
going down when considering the overall number of servings of chicken
consumed. NCC firmly believes that it is imperative that public health
decisions and policy follow the data, not the other way around.
Additionally, there appears to be a significant misunderstanding
about how the broiler industry operates, the industry's supply chain
structure, and current industry practices regarding the control of
Salmonella. As a result, the policy contemplated in the proposed
Salmonella Framework would result in untold amounts of food waste. Raw
chicken is a highly perishable product with a short shelf life, and
supply chains are not set up to hold substantial quantities of raw
chicken. An enforceable finished product standard would require testing
and holding of enormous quantities of raw chicken until results are
received. There simply is not enough cold storage in the country to
accomplish this, and a widescale test and hold program, in addition to
being extremely expensive, would significantly degrade product shelf
life and quality. Companies may be forced to destroy product or divert
the product to be fully cooked, which accounts for only a modest amount
of chicken production and would quickly find both demand and processing
capacity outstripped.
Likewise, if Salmonella were declared an adulterant in raw poultry,
USDA would expect a recall if a product were found to exceed the
standard, and it is entirely unclear how the agency would determine
what products to recall. Chicken processing plants produce enormous
volumes of chicken each day, processing birds from multiple chicken
houses each day. The birds from a day's production commingle at various
points, such as in the chilling systems, and it is impossible to break
up a day's worth of production into microbiologically distinct
production lots. The problem compounds because different parts of birds
go to different uses in the supply chain. NCC is extremely concerned
that under the proposed Salmonella Framework, a single test result
could cause the recall or destruction of an extremely large amount of
product. There are much better ways to focus efforts on driving down
levels of Salmonella without raising these extremely complicated issues
and so carelessly wasting food.
As written, the proposed Salmonella Framework threatens the
economic viability of the entire poultry sector and would result in
increased costs and reduced availability of chicken. This would be an
extremely unfortunate outcome, especially in light of recent record-
setting, across-the-board inflation and the continuing food insecurity
afflicting millions of American families. Chicken is America's most
affordable and most consumed animal protein. It is nutritious and
versatile, and it is a staple protein for many, and critically for
those families trying to make the most out of every food dollar.
Moreover, chicken makes up a significant portion of food bank donations
and purchases for Federal and state nutrition assistance programs.
Aspects of the proposed Salmonella Framework threaten to undermine
chicken availability.
A finished product standard would likely cause substantial amounts
of product to be diverted to cooking operations. However, there is
limited use and demand for precooked chicken, and that demand is
largely saturated. Moreover, there is limited capacity to actually
produce cooked chicken. Combined, these factors mean that hundreds of
millions of pounds of chicken would simply be destroyed each year,
reducing chicken supply, and driving up costs.
NCC member companies share USDA's goal of reducing Salmonella
levels on raw chicken and, ultimately, driving down salmonellosis
cases. The chicken industry has made tremendous advances in reducing
Salmonella presence, and the industry continues to drive down
Salmonella. However, NCC has serious concerns about many aspects of
USDA's proposed Salmonella Framework. This proposed policy contemplates
actions that exceed USDA's statutory authority, that would be extremely
difficult and perhaps impossible to implement, and that are not
consistent with modern food safety approaches. Moreover, the lack of
supporting information and data make it extremely difficult to
meaningfully evaluate the policies and suggest the agency is changing
its longstanding process of using science to inform policy. The one
certainty about this policy is that it would result in hundreds of
millions of pounds of chicken being thrown into landfills each year,
exacerbating food insecurity and driving up the cost of chicken.
Salmonella in Certain Not-Ready-To-Eat Breaded and Stuffed Chicken
Products
In addition to the Salmonella Framework, USDA has also indicated it
is considering declaring Salmonella an adulterant when present above a
threshold level in certain not-ready-to-eat (NRTE) breaded and stuffed
chicken products that require cooking but may appear ready-to-eat (RTE)
to a consumer because of breading (e.g., chicken kiev or chicken cordon
bleu). A subset of NCC members produce various types of these products,
which are consumed safely nearly every time they are eaten. NCC and its
members have worked for more than a decade to develop and refine best
practices for these NRTE but appear RTE products, including labeling
guidelines and intervention strategies, all of which are designed to
ensure that consumers can prepare and consume these products safely.
These efforts have successfully resulted in a substantial reduction of
foodborne illness outbreaks related to this product category, reducing
the incidence of ten Salmonella outbreaks in these products between
1998 to 2015 down to just one from 2015 to present.
While USDA's proposal is not yet public, we understand USDA is
considering declaring Salmonella an adulterant when present at more
than one cfu per gram in these products. Like with the broader proposed
Salmonella Framework discussed above, USDA has not provided any
scientific information to support this position. This change would also
have serious economic impacts on industry, reducing availability of
safe, nutritious products for consumers and eliminating jobs in rural
communities. Based on a survey NCC conducted, on an annual basis, NCC
member companies produce over 75 million pounds of finished NRTE but
appear RTE stuffed chicken products, which equates to almost 193
million servings and an estimated finished product annualized value of
almost $284 million dollars. Declaring Salmonella an adulterant in
these products would undermine their commercial viability and would
likely result in the closure of five total production lines, job losses
for almost 550 full-time-equivalent employees, and the departure of
smaller producers from the market entirely. NCC estimates the net
economic costs of this proposal at more than $100 million annually to
those NCC member companies. It is unclear why USDA is devoting so much
attention and effort to a niche product category that is not likely to
materially affect overall public health. The poorly thought-out policy
works against several goals of the current presidential Administration
and Congress by increasing food prices, decreasing competition, and
eliminating jobs in rural areas.
NCC has long sought to work with USDA to develop a science-based
policy that enhances food safety of these products and benefits
consumers without the drastic negative impacts described above. In
particular, NCC has identified alternative approaches that use
mandatory safety labeling to ensure consumers properly prepare these
products, an approach recommended by one of USDA's own committees. NCC
has twice petitioned USDA to adopt regulations establishing labeling
requirements for NRTE stuffed chicken breast products that may appear
RTE and issue a Compliance Guideline for developing and communicating
validated cooking instructions for such products, neither of which has
been acted on, and a copy of NCC's most recent petition is attached for
further reference.\45\ Alternatively, or in addition to, these labeling
interventions, USDA could work with industry to conduct baseline
sampling on raw chicken source material to assess the presence of
Salmonella before products enter a manufacturing facility and develop
performance standards for raw materials based on that information.
---------------------------------------------------------------------------
\45\ Exhibit 6, NCC Petition Re: NRTE Stuffed Chicken Breast
Products (Feb. 25, 2022).
---------------------------------------------------------------------------
* * * * *
In short, the broiler industry is committed to continuing to
produce safe, wholesome, high-quality protein for American consumers
and supporting rural economies across the country. Congress can help us
achieve these goals by ensuring Federal regulatory requirements are
based in science and common sense, are achievable, and do not
jeopardize the industry efficiency we have worked so hard to build. To
supplement my testimony, I am enclosing as attachments rulemaking
comments, reports, and petitions providing more detail on the chicken
industry and our concerns with the regulatory approaches I have
discussed.
Thank you for this opportunity to appear before the Committee and
for your continued efforts to support America's meat and poultry
industry. Chicken is the most important protein in the world, and we
are proud of the work our industry does to feed, employ, and support
hard-working Americans. I look forward to answering your questions.
Exhibit 1: NCC 2020 U.S. Broiler Chicken Industry Sustainability Report
September 21, 2020
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Table of Contents
Introduction
Air, Land and Water
Broiler Health and Welfare
Employee Safety and Wellbeing
Food and Consumer Safety
Community Support
Food Security
What's Next?
Introduction
A Letter from Mike Brown, President of the National Chicken Council
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It has been a decade since I
was named President of the
National Chicken Council. In
those 10 years, much has
changed. And no changes hit as
profoundly--or as quickly--as
those that we both responded to
and initiated in 2020.
Change arrives in fits and
starts. We can see it coming
and it can surprise us. I have
been constantly impressed by
and grateful for the resilience
and the creativity of our
industry when responding to
change--both the long view
solutions that are best
implemented slowly and the
rapid deployments de-
manded by immediate need. We have shown ingenuity and commitment in the
face of change, regardless of the challenge.
Nowhere has the industry's commitment to innovate been better
revealed than in our sustainability efforts. So, in a time of quick and
unquestionable change, the moment seems right to celebrate those
efforts in a way that gathers an overview of our sustainability
progress, stories and commitments.
What you will read in the following pages represents National
Chicken Council's (NCC's) inaugural sustainability report. It is the
culmination of many years of work and, also, humbly, the starting point
for many more years of collective effort by the U.S. chicken industry.
Effort that brings to life our commitment to environmental and social
responsibility, and recognition that continuous improvement is critical
to address today's sustainability challenges. Effort made to ensure
both a healthier industry and a healthier planet into the future.
Effort that proves, again, our mission to always change for the better.
As this report is coming out, NCC and many of our members are also
actively engaged in a multi-year effort by the U.S. Roundtable for
Sustainable Poultry & Eggs to capture the sustainability of all U.S.
poultry through a framework that will help us guide future work and
change.
So, about all this change . . .
The chicken industry has a long history of adapting to difficult
situations and meeting changing demand. 2020 was no different in that
way. The COVID-19 outbreak reminded us that our food system has long
been ``critical'' and ``essential'' before those words became part of
our daily pandemic vocabulary.
Our top priorities in 2020 were two-fold: keeping our essential
workers safe and keeping chicken stocked in the meat case. Chicken
producers and their industry allies went above and beyond to ensure
America's No. One protein continued flowing to store shelves.
In this, it was imperative that a proper balance was struck between
ensuring a steady supply of food while maintaining the health and
welfare of the people who work tirelessly to produce and deliver that
food. Chicken producers did everything they could to keep workers
healthy and safe while keeping America fed--in that order.
The impact of this balance? Half of Americans who eat chicken say
they ate it more than any other protein during the COVID-19 challenges
of 2020. In fact, during the first 9 months of COVID-19 in the U.S.,
retail chicken sales increased 19.5% from the same period in 2019. We
more than kept pace with Americans' demand for chicken while
simultaneously implementing crucial safeguards that protected our
workers.
If we can rally and adapt this effectively in a time of crisis, I
have no doubt we can combine our historical knowledge with newfound
capabilities born of the pandemic and apply them to sustainability
opportunities in the brighter times ahead of us. In fact, what you will
find in these pages should be inspirational, highlighting our successes
to date and the promise of innovations to come.
Innovation is at the core of our inception as an industry--and
remains at our core today.
In 1923--just shy of 100 years ago--Cecile Long Steele of Delaware
faced down a surprising challenge and ended up inventing the modern
chicken industry. She ordered 50 chicks for egg production and
received, instead, 500 due to a clerical error. She kept and raised the
chicks, selling them for meat. Within 2 years, she was raising 10,000
meat-type chickens.
In her world, chickens generally ended up in a stew pot only when
they got older and their egg-laying days were dwindling. But
happenstance and her entrepreneurial ingenuity harnessed by the Roaring
20's economy, advances in refrigeration, and improved transportation
technology--and the rest is broiler history.
Cecile Long Steele's pioneering spirit nearly a century ago still
drives us. Over the past decades, our industry has made huge strides in
embracing innovation to increase the sense of responsibility that is
also at our core--a responsibility to care for the planet, our workers,
and our most important asset: our chickens.
You will see this pioneering spirit and commitment come to life
here through the passion of small farmers, the technology breakthroughs
of processors, the impactful commitments of distributors, and more.
This report is by no means exhaustive. Nor is it our final report.
For the chicken industry, sustainability means being responsible
stewards of land and water, animal and feed management, our people, and
communities into the future. Sustainability is a journey--our journey
as a national industry and member of the international community.
My home in Delaware isn't too far from where Mrs. Steele started
raising her chickens. I have a special appreciation for the land and
water on the Eastern Shore, and I see firsthand everything chicken
producers do to protect and preserve it.
And while the modern version of our industry may have started very
near where I write this in Delaware, it now extends to nearly every
corner of this country and, in fact, much of the world.
You will see in the pages ahead, based on new data from the Broiler
Production System Life Cycle Assessment: 2020 Update, that the efforts
and leadership of those who carry on and improve upon this tradition
are making measurable progress.
The numbers tell us that collectively we have made significant
improvements in key sustainability intensity metrics (environmental
footprint per bird) between 2010 and 2020.
We are feeding more people and we are raising each bird with less
environmental impact and resources.
Having come so far in the past 10 years, we are nevertheless
committed to achieve additional progress in the next 10 and beyond.
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Mike Brown,
President of the National Chicken Council.
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Our Approach to Sustainability
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If you're not taking care of your soil and your air, then you
have nothing. And, making sure that we do that, either through
our cropland production or in our chicken houses, it's just our
lifeblood. It's important for us to run a farm that is
sustainable because we have children who will inherit this
farm, and we want to make sure they can have this farm in 100
years.
Rachel Rhodes.
Throughout every step of the chicken supply chain, our industry is
looking toward the future.
With the help of technology, modern breeding, nutrient management,
feed conversion and improved animal husbandry practices, the U.S.
chicken industry has significantly reduced the use of water, farmland,
electricity, and other valuable natural resources, while reducing
greenhouse gas emissions, over the last century. This past decade our
industry has been particularly effective in these areas.
But our commitment to the future certainly does not end with our
commitment to our planet and our birds. For us, ``sustainability''
encompasses the many ways that we conduct business responsibly--yes,
for our planet and our birds, but also for the many people and
communities affected by our work and our products.
Sustainability is a journey of collective successes and growth
areas, which are driven by and include the many companies,
organizations, and individuals who are diligently pushing our industry
and international community toward a more sustainable future.
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Our stakeholders are global--
defined by the people who work
in our industry, consume
chicken, or are in any way
impacted by the industry. We
have made a conscious effort to
elevate those voices in this
report with information
supported by data and actual
human experience.
As farmer Rachel Rhodes
articulates so eloquently, this
industry is our lifeblood. Our
commitment to feeding our
country, and the world, is
meaningless if it does not
serve to benefit those who will
follow in our footsteps for
generations to come.
Arbogast Farms
Lauren Arbogast, Family Partner/Farmer
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A Culture of Sustainability: Generation by Generation
Sustainability can be a tricky word. Practices vary from farm to
farm and region to region, leaving a bit up to decision-makers and
agriculture families. But regardless of the personal definition or area
of impact, the root of sustainability packs the same punch--striving to
do what's best for the next generation, one step at a time.
Our farm, Arbogast Farms, began in the 1970's with a few beef
cattle and a lot of free-range turkeys. As the farm evolved over the
years, the turkeys moved into cutting-edge barns, the cow herd
dwindled, and farm management started the then-radical practice of no-
till for the crop fields. In the early 2000s, the one remaining turkey
house was converted to a chicken house, four new state-of-the-art
chicken houses were built, and the beef cow herd was also strategically
upgraded. Fields that had been no-till for decades now added in crop
rotations and cover crops. And in 2020, our farm installed solar panels
on all five chicken houses, lessening our impact on the electrical
grid.
As a working multigenerational farm, there are many pieces to the
puzzle of working together for the common goal of sustainability.
Without a doubt, each member of the farm advocates for practices that
ensure the next generation will have more opportunities on the same
land and resources. Little by little, decision by decision, our farm
has made sustainability common practice.
We at Arbogast Farms are looking toward the future with optimism.
We have the next generation coming up on the farm, learning and
watching, and, also, inventing and doing.
We hope we have created a culture that looks at innovation and
sustainability as a baseline, not an end goal. We look to continually
improve our practices in this generation and into the next, leaving our
land and resources in a better position than where we found them.
------------------------------------------------------------------------
-------------------------------------------------------------------------
Aviagen
Committed to Sustainability
One of the most exciting environmental sustainability projects in
our industry undertaken globally is a campaign by Aviagen to gather
information to better define their sustainability footprint.
This new project is their most comprehensive to date, taking into
consideration their in-house footprint, while also considering the
sustainability benefits to the industry with broiler chicken genetic
advancements.
Knowing where we stand today helps us know where we need to be
going.
Aviagen and others taking on the task of defining their footprint
help us all determine our most impactful direction.
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What You'll Find in This Report
We organized this report around the six broad topics that are most
important for our industry:
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Air, Land and Water
Our industry's environmental impacts and
contributions to a healthy planet through emissions
reductions and responsible use of water and land
resources including the results of the Broiler Production System Life
Cycle Assessment: 2020 Update.
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Broiler Health and Welfare
Our industry's animal husbandry practices that
support broilers' health, nutrition, comfort and
overall well-being.
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Employee Safety and Wellbeing
Our commitment to worker safety and well-being, and
the ways that we keep workers safe.
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Food and Consumer Safety
The many ways that our industry supports consumers'
health, by providing affordable, safe and essential
nutrition.
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Community Support
This is about our industry's support for local
communities through the creation of jobs and donations
of money and food to businesses, charity or-
ganizations and others.
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Food Security
Our industry's contributions to ensuring
uninterrupted access and availability of affordable,
nutrient-dense food.
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These are the areas where our
industry's efforts matter
most--for supporting industry
growth and for producing and
providing food to people
responsibly, in ways that
protect communities and the
planet and ensure food is
available when people want and
need it.
These also are the broad
topics that consumers and our
many other stakeholders have
told us are important to them.
While our industry's
environmental impacts (Air,
Land and Water) might be top of
mind for many people, we
recognize that other
individuals might feel as
strongly, or more strongly,
about animal welfare or one of
the other topics we have
included here.
We also recognize there is
overlap of these material
topics, with progress in some
areas helping to drive progress
in others. For these reasons,
all six topics are important
and discussed in this report to
demonstrate how the industry is
innovating to meet needs and
expectations.
As you will read, poultry
operators across the entire
value chain are making
commitments and taking action.
From feed mills to breeder
farms, hatcheries, grow-out
houses (the barns where broiler
chickens live and grow),
processing plants, and retail/
foodservice operators. From
large integrators to small
family farms. Organizations of all sizes and types are making
meaningful progress and contributing to the industry's collective
journey of continuous sustainability improvement.
Foreword on Global Impact
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The U.N. Sustainable Development Goals (SDGs)
guide our responsibility approach.
Collectively, the 17 SDGs provide a blueprint
for a better and more sustainable future for
all people and for the planet. The SDGs present
a challenge and an opportunity for all of us--a
global
call to action to drastically decrease poverty, hunger, climate change
and inequality by 2030.
By delivering on these goals, we believe we can have the biggest
positive impact.
These are the areas where our contributions are most important for
improving lives and fostering environmental stewardship.
The U.S. chicken industry is doing its part to drive progress, and
we intend to continue our efforts.
To guide the path forward on behalf of the entire U.S. chicken
industry, the NCC actively seeks partnerships and alliances with other
organizations, to identify opportunities for synergy and leverage
collective strengths.
Feeding people, and doing so equitably and sustainably, requires
combined effort.
The constellation of activities involved in producing, processing,
transporting, and consuming food (i.e., entire food systems) must all
operate cohesively and in sync.
Food systems must withstand many disruptions--everything from
extreme weather events to pandemics like COVID-19, biosecurity issues,
and cybersecurity breaches. The U.S. chicken industry stood up to all
of these challenges in 2020 alone.
------------------------------------------------------------------------
------------------------------------------------------------------------
We are particularly inspired by four of the SDGs:
Goal #2 Goal #8
Zero Hunger Decent Work and Economic Growth
End hunger, achieve food Promote sustained, inclusive
security and improved nutrition, and sustainable economic growth,
and promote sustainable full and productive employment,
agriculture. and decent work for all.
Goal #12 Goal #17
Responsible Consumption and Partnerships for the Goals
Production
Ensure sustainable consumption Strengthen the means of
and production patterns. implementation and revitalize the
global partnership for sustainable
development.
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The U.N. is calling for transformation of the
world's food systems to be healthier (nutrient-
based), more sustainable, and more equitable.
As an active member of the Animal Agriculture
Alliance, we are aligned with the animal
agriculture community, which seeks to pro-
mote practical, broad-based, action-oriented solutions backed by
science, innovation and proven impact--solutions that include producers
of all sizes and types at many points in their journey for continuous
improvement and more sustainable systems.
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The U.S. Roundtable
for Sustainable Poultry
& Egg (US-RSPE) is
another one of NCC's
key partners. We are
working closely with
them on the first-ever
sustainability
reporting framework for
the full U.S. supply
chains for chicken,
turkey and eggs, which
will launch
in early 2022.
The NCC will continue to look for opportunities to collaborate with
others to achieve greater progress toward sustainable development.
By collaborating whenever possible, and by supporting our members'
efforts to deliver sustainable, safe, affordable, and nutrient-dense
food, we are continuing to drive the solutions that the world needs.
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Leadership Profile
National Chicken Council
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Ashley Peterson, Senior Vice President of
Scientific & Regulatory Affairs
An Appreciation for Seasons, Blisters and
Wholesome Food
Growing up in rural Kentucky, spending
countless hours with my granddaddy on our small
farm and working until my hands were blistered,
I quickly learned how to appreciate where my
food came from and the sacrifices it took to
feed our family--generation after generation.
The acres and acres of vegetable gardens were
never weeded or tilled
enough as the summer crops were going to be canned, frozen, or
otherwise preserved to feed everyone for the coming year. I thought I'd
never get to the bottom of the bushels of ripe tomatoes, shuck enough
corn, or shell enough black-eyed peas and lima beans under the big oak
trees surrounding the old farmhouse.
When it got cold, it was time for butchering. I'll never forget one
Saturday afternoon I was hanging out in the chicken house (a common
place to find me as a kid--which, in hindsight, Leadership Profile
makes sense of my work in this amazing industry), and the rooster
decided he didn't like me hanging out with his ladies . . . and spurred
me up my leg.
Not sure how old I was, but I went to the house and found my
granddaddy. Without a word he headed off to let that rooster know who
was boss. My grandma made the best chicken and dumplings ever--not to
mention the fried okra. I'm not sure why but she couldn't make good
fried chicken to save her life--not that you'd want to make fried
chicken with a mean old rooster anyhow . . . but he went well with
those dumplings.
Every year a steer and three hogs would be subject to my
granddaddy's appreciation, expertise, and dexterity. I'll never forget
the time I was finally ``old enough'' to help slaughter a steer--that
was something for a 10 year old. We'd hang the steer in the tobacco
barn off the bucket of an old John Deere Crawler until it was cold
enough for butchering.
For the hogs, we had a large trough we'd put over a fire to heat up
the water for scalding. Once we started the butchering and had enough
fat separated from the carcasses, it was my job to render the fat--
separate the lard from the cracklins.
Now if you've never had fresh hot (and I mean burn the skin off
your mouth hot) cracklins, you haven't lived.
Once rendered, we'd ladle the fat into a lard press (which also
served as the sausage stuffer) lined with cloth and collect the lard
would be used for cooking and topping off jars--my grandma even made
lye soap. We also made our own sausage, and I've never had the same
since.
Looking back over these experiences, one thing was for certain--I
learned to keep cold things cold, hot things hot, and keep things clean
when it came to food preparation. I learned that though the animals we
raised were raised for a purpose, they would always be treated humanely
and with the respect they deserved.
In today's world, most people do not have these experiences, and I
am thankful for the blisters, countless working hours, and appreciation
it instilled in me about where our food comes from and all of the hard
work that goes into feeding the world safe and wholesome food.
Air, Land and Water
It takes a healthy planet, fresh water, fertile soil, and clean air
to raise and produce chicken.
Through continuous innovation, the chicken industry has become
significantly more efficient in its use of water, farmland,
electricity, and other valuable resources over time, and has reduced
greenhouse gas emissions.
New Life Cycle Assessment Shows Substantial Progress Across All Key
Impact Categories
For this report, we commissioned an updated sustainability
assessment of U.S. broiler production to better reflect current
production systems. And what a difference a decade of dedication can
make.
Using new life cycle inventory data, highly regarded third-party
expert Dr. Greg Thoma and his colleague Ben Putman quantified the
environmental impact of U.S. broiler production across a broad range of
impact categories. The results of the assessment are documented in the
Broiler Production System Life Cycle Assessment: 2020 Update,\1\ a
fresh Life Cycle Assessment (LCA) that showcases where we are now, how
the sustainability impacts have changed in the past 10 years, and where
we might focus next to make continuous improvements.
---------------------------------------------------------------------------
\1\ https://www.nationalchickencouncil.org/wp-content/uploads/2021/
09/Broiler-Production-System-LCA_2020-Update.pdf
---------------------------------------------------------------------------
An LCA is a quantitative environmental method used to compile and
assess environmental impacts of products, processes, and services over
their entire life cycle. The goal of the 2020 LCA was to focus on the
chicken industry's three primary levers of sustainability:
1. Feed conversion ratio and average daily gain (including typical
market live weight)
2. Feed composition (industry average ration formulation), and
3. Litter production and management.
What happened between 2010 and 2020 in U.S. broiler production?
Broiler production increased 21%.
In addition, all key sustainability intensity measures improved
between 13% and 22%. For every kg live weight of broiler (and cull
breeder hen) produced during the 10 year time period:
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Per kg live weight broiler and cull breeder hen: Land use
decreased from 2.13 to 1.85 m\2\a crop eq; carbon footprint
decreased from 1.23 to 1.00 kg CO2 eq; water
consumption decreased from 0.29 to 0.25 m3; fossil resources
use decreased from 0.27 to 0.21 kg oil eq; and particulate
forming emissions decreased from 2.36 to 2.03 g
PM2.5 eq.
Keep in mind that these improvements were made on the heels of
substantial improvements made between 1965 and 2010. According to the
prior life cycle assessment, producing the same amount of chicken in
2010 as in 1965 was already having 50% less impact on the environment.
By 2010, our industry data showed:
75%..... fewer resources required in poultry production
36%..... reduced impact of poultry production on greenhouse gas
emissions
72%..... decrease in farmland used in poultry production
58%..... decrease in water used in poultry production
The improvement in intensity metrics does not tell the complete
story.
We recognize that cumulative sustainability impacts are also very
important. In contrast to the intensity metrics relating to each bird
(or each kg of bird) produced, ``cumulative'' measures reflect overall
environmental impacts by the entire U.S. broiler industry--the total
amount of resources used and greenhouse gases emitted--in a given year.
The 2020 LCA shows that, from a cumulative standpoint, there were
improvements in two key sustainability measures, despite the 21%
increase in broiler production between 2010 and 2020.
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The three other key sustainability measures showed increases during
the 10 year time period, from a cumulative standpoint.
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Land use up 5.4%
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Water consumption up 5.4%
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Particulate forming emissions up 4.4%
Percentage change in five key sustainability measures between 2010
and 2020 (total production of broilers and cull breeder hens):
------------------------------------------------------------------------
Percent
Impact category 2010 2020 change
------------------------------------------------------------------------
Lan47,157,854,a 49,701,161, 5.4%
711 527
Carbon footprint (kg CO2 eq) 27,225,935, 27,000,732, ^0.8%
616 155
Water consumption (m\3\) 6,401,558,6 6,748,789,9 5.4%
72 20
Fossil resources use (kg oil eq) 6,035,302,9 5,691,972,9 ^5.7%
38 56
Particulate forming emissions (kg 52,283,488 54,568,949 4.4%
PM2.5 eq)
------------------------------------------------------------------------
These increases are still far below the increases in broiler
production, which is an impressive and promising trend. It is often the
case that growth of a sector outpaces the improvement in intensity. Had
the impact categories shown increases that kept pace with broiler
production in the past 10 years, then all impacts would have seen a 21%
increase. Feed is the primary driver of the impacts. What's happening
on the farms in terms of feed, and feed conversion ratio, is driving
the progress. As compared to 2010, in 2020, we saw an 8.7% improvement
in feed conversion ratio--total broiler production increased by 21%,
with only an 11% increase in total feed consumed.
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Simply put, our
industry is producing
more and using less.
We have bigger birds,
we have more birds, and
we are achieving these
gains with greater
efficiency and a
lighter environmental
footprint than ever
before.
Chicken production
has long had a less
significant
environmental footprint
than almost any other
animal agriculture
industry. We have made
meaningful strides in
minimizing
environmental impact
with the help of
technological
advancements and
improved animal
husbandry practices.
Now, let's dive
deeper into why chicken
production in the U.S.
is more sustainable
today than ever before
. . .
Point of View
Aviagen
Jan Henriksen, CEO
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Our climate is changing, and people and
governments around the world are seeking ways
to protect our planet.
Because food production is a primary driver
of climate change, our challenge will be to
feed the world's expanding population with a
reliable and quality source of nutrition, while
reducing the effects of production. One
promising solution lies with poultry.
Chickens are naturally gentler on the
environment than other livestock. On top of
that, chicken companies have been working for
decades to breed efficiencies that not only
produce healthier birds, but also
make commercial chicken production environmentally responsible. Simply,
we see poultry as the responsible protein.
Sustainable intensification has become a global aspiration in the
quest to increase food production from existing farmland while lowering
pressure on the environment.
Over the past decade, broiler breeding companies have put
significant resources and effort into creating efficiencies in chicken
production that support sustainable intensification.
One such efficiency is a healthy feed conversion rate (FCR).
Today's farmers can raise a healthier and more robust chicken more
efficiently.
Another benefit is in the area of land use. As our global
population continues to swell, agricultural land will become more and
more limited.
With a lower FCR, less land will be needed to grow feed. The grain
not used for poultry feed can be used for other purposes, and the land
can be repurposed for other crops.
The important conclusion is that poultry's naturally lower resource
consumption, coupled with innovative breeding efficiencies, means fewer
resources are required to produce an increasing volume of high-quality
chicken meat.
Poultry greenhouse gas emissions are naturally low.
Chicken production demands far fewer resources.
Using less land means less destruction of natural wildlife
habitats.
Chickens are more water-efficient than other livestock.
Air
The production of all food--whether it's meat, seafood or fruits
and vegetables--results in greenhouse gas (GHG) emissions.
Farmers want the best air quality not only for their chickens, but
for the health of their family, employees and communities. The
following are some of the ways our members act on their commitment to
clean air.
The Role of Technology
Even with a relatively small footprint, chicken companies are
regularly seeking accessible and affordable technology upgrades that
will improve the ways broiler production affects air quality.
1. LED lighting
2. Computer controls
3. Solar panels
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LED Lighting
In recent years, most chicken farms have switched to LED
lighting, which can result in energy savings of 80-85% compared
to traditional incandescent lightbulbs.
Michelle Chesnik's farm in Maryland LED bulbs on the
farm help her realize a 25-35% savings in energy. By
using energy efficient lightbulbs, they lower their
cost while taking better care of the environment.
Tim and Deena Morrison's farm in Kentucky They
minimize their energy use by regulating the lighting
inside their chicken houses. Dimmable lightbulb
technology aids in maintaining a healthy environment
for the chickens and decreases inefficient use of
lighting.
Rachel Rhodes' farm in Maryland LED lights on the
farm help mitigate energy usage. And, controllers tell
them when the lights go on and when the lights go off.
If something's askew it can be checked right away.
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Computer Controls
Modern grow-out houses are mostly controlled by sophisticated
computers that make continuous changes in temperature and
ventilation to maintain optimal environmental conditions for
the chickens, while saving gas and electricity.
Tim and Deena Morrison's farm in Kentucky Their
chicken house is monitored by a master computer that
controls the chickens' dimmable lights based on outdoor
temperatures, time of day and age of the flock. Along
with lighting, the control computer also regulates
airflow and temperatures to maximize chicken health
over each stage of the flock's life. While chicks grow,
their environment also needs to change. The controller
makes these environmental changes efficiently and
effectively.
Terry Baker's farm in Delaware Each chicken house has
its own computer and it's the brain of the chicken
house. It controls the fans, the light, the feed, the
water, the temperature, the heaters--all with an app on
his phone--which gives him instant access to maintain
the health of the birds, regardless of where he is.
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Solar Panels
Some chicken farmers are installing solar panels in order to
limit their energy use, producing their own electricity on-
site.
Terri Wolf-King's farm in Maryland She installed
solar panels on her farm to help lower the energy bill
and environmental footprint. Since installation, she
has seen a significant reduction in energy use.
Tim and Deena Morrison's farm in Kentucky Their solar
panels have saved the equivalent usage of 60-70 tons of
coal per year.
Terry Baker's farm in Delaware The farm is now
entirely run on solar.
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Ammonia Mitigation
Ammonia is a natural byproduct of chicken production. For farmers,
there are many solutions to help improve air quality on their farms and
reduce ammonia--starting with planting foliage around their chicken
houses to capture ammonia and collect dust. These plants often serve a
dual purpose of reducing potential odors.
Farmers also regularly monitor ammonia levels within their chicken
houses. Although useful in fertilizers, certain levels of ammonia in
the chicken house can be damaging to the chicken, the farmer and the
environment. For this reason, farmers use litter treatments to aid in
the retention of ammonia, as well as ventilation and monitors to ensure
the health of their flock.
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We planted Miscanthus, arundo and switchgrass between
the chicken houses and in front of tunnel fans to
capture ammonia and collect dust and particles. The
plants also help reduce potential odors from the
houses. Using computer technology, I can track gas
levels in the chicken house, like ammonia, from a
smartphone.
Terry Baker.
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We planted greenery around the farm to help lower our
carbon footprint. The pollinators, especially, provide
a resource for insects and other wildlife that call the
local ecosystem home.
Jenny Rhodes
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Our farm is encircled with a vegetative buffer that
consists of hybrid willows and green giant arborvitaes.
This vegetative buffer acts as a windbreak saving
electricity and fuel, helps capture dust and
particulates from the fans, and makes the farm more
aesthetically pleasing to neighbors.
Georgie Cartanza
Staying Local
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In addition to
technologies, creative
foliage solutions, and
various ventilation and
ammonia mitigation
techniques, localizing
production facilities
is another way the
chicken industry works
hard to be efficient
with resources. Despite
its global reach,
American chicken
production is an
extremely local
business.
The distance from the
hatchery to the farm to
the processing plant is
usually no more than 60
minutes away from one
another. Localized
production between the
hatch-
ery, farm, and processing plant reduces time traveled, emissions, and
costs. This efficiency and localization ties directly to a reduction of
GHG emissions.
Air Leadership Snapshots
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JBS Makes Global
Commitment to Achieve
Net-Zero
Greenhouse Gas
Emissions by 2040
In March of 2021, JBS
announced a commitment
to achieve net-zero
greenhouse gas (GHG)
emissions by 2040. The
commitment spans the
company's global
operations, including
Pilgrim's Pride
Corporation as well as
its diverse value chain
of agricultural
producer partners,
suppliers, and
customers in their
efforts to reduce
emissions across the
value chain.
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Sanderson Farms Sees
Continuous Improvement
in En
ergy Use Reduction
In 2008, a baseline
of gas, water, and
electricity usage was
established at
Sanderson Farms. The
Company continues to
measure against this
baseline to improve our
operations and to show
continuous improvements
across all locations.
Since 2008, Sanderson
Farms has seen a 20.4%
reduction in
electricity usage,
38.3% reduction in
natural gas usage, and
44.6% reduction in
water usage (all per
WOG lb).
Air Leadership Profiles
Tyson Foods
Leigh Ann Johnston, Director, Sustainable Food Strategy
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Tyson Foods' ambition is to be the most
sustainable and transparent food company in the
world and we're working hard every day to make
the ambition a reality. Tyson recently
announced a target to achieve net zero
greenhouse gas (GHG) emissions across our
global operations and supply chain by 2050.
Tyson is excited about the work that will be
done to achieve this target, but realize we
cannot do this alone. Partnership and
collaboration is critical and we're looking
forward to working with our supply chain
partners, NGO's, customers, academia, and other
stakeholders in order to make the greatest
impact.
Sanderson Farms
Stephanie Shoemaker, Manager, Environmental (Regulatory & Permitting)
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Sanderson Farms has been installing Pressure
Swing Adsorption systems at every new facility
since 2012, which reduces our dependence on
purchased natural gas, and creates a renewable
energy resource that can be used seamlessly
used in the processing facility. The
Environmental and Engineering Departments of
Sanderson Farms perform daily reviews of
utility usage (gas, water, electricity) of all
facilities to ensure all are operating as
efficiently as possible. Any corrections and
adjustments are made immediately to improve
efficiencies, without waiting for the monthly
utility bill to arrive.
Land
What goes on the land and in the land impacts everything that comes
from the land--and how that land might be engaged for generations to
come.
No one is more aware of this than our farmers.
As measured by our 2020 LCA Update, assessing land use helps us see
how that use--and changes in that use--affect biodiversity.
Biodiversity is protected and supported when less land is used for
agricultural (and other human) purposes. The 2020 LCA Update showed
that our chicken industry is doing a great job conserving land
resources.
Specifically, land use per kg of production (broilers plus culled
hens) decreased by 13% between 2010 and 2020. Although cumulative land
use by the industry increased by 5.4%, production increased by a full
21% to serve the critical societal benefit of feeding people.
Litter management is another important land-related measure for our
industry. We learned from the 2020 LCA Update that poultry litter is
not a strong driver of climate impacts. Only the emissions from litter
that is classified as ``waste'' get assigned back to the animal
husbandry stage--a tiny fraction, as shown below.*
---------------------------------------------------------------------------
* The 2020 LCA update followed the U.N.-supported LEAP guidelines,
which is a science-based methodology that defines three specific
options for allocating and accounting for litter emissions: residual,
co-product, and waste.
---------------------------------------------------------------------------
Litter management is a key sustainability lever that is being
impacted directly by our chicken breeders. In practical, on-the-ground
terms, chicken litter, or poultry litter, is not a waste product. It
is, in fact, an extremely valuable resource in agriculture. This mix of
chicken manure, spilled feed, feathers, and material used for bedding
in the houses is something our farmers value highly. Most often, our
farmers collect and store litter to be used as an organic fertilizer
for crops--on their farms or nearby farms. Plants feed the chickens and
chickens fertilize the plants--it's a closed, sustainable nutrient
loop.
The nature of transactions regarding poultry litter disposal in the
U.S., and their consequences on output classification according to
U.N.-supported Livestock Environmental Assessment and Performance
(LEAP) guidelines.
------------------------------------------------------------------------
Fraction of litter from
Disposal ----------------------------------- Classification
transaction Broilers Breeders
------------------------------------------------------------------------
Sold 50% 36.3% Co-product
Hauled off for a 3.2% 4.2% Waste
fee
Bartered 36.1% 39% Residual
Given away 10.7% 20.5% Residual
------------------------------------------------------------------------
Our Farmers Speak: Land, Litter and Longevity
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``Like many chicken
farmers, we've
installed concrete
heavy use area pads
(HUA pads) at the
entrance of each
chicken house. These
concrete pads allow for
easier collection of
chicken litter without
any elements getting
lost or spread into the
ground. This litter is
then composted and
recycled to be used as
a natural and organic
fertilizer.''
Rachel Rhodes.
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``All poultry litter
from my chicken houses
is stored and
composted, and then
used as a fertilizer
for my row crops.
Litter from poultry
farming is a community
recycling effort. I
often buy litter from
other farmers to be
used as fertilizer on
my crops. To maximize
the effectiveness of
the litter as
fertilizer, I work with
outside counsel to
create a nutrient
management plan.''
Terri Wolf-King.
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``We make sure that
100% of our chicken
litter supply is used
as all-natural slow-
release plant food on
row crops. About half
of our litter is sold
to a broker who sells
the fertilizer to other
local crop growers. On
Morrison Farm, a soil
nutrient management
plan is created that
optimizes the spread of
the rest of the
fertilizer.''
Deena & Tim Morrison.
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``100% of the poultry
litter on our farm is
recycled and reused. We
collect poultry litter
from the chicken houses
and move it to a
secured shed. We then
work with a broker to
find other farmers who
recycle the chicken
manure as an organic
fertilizer on row crops
and mushrooms.
Nutrients generated as
a byproduct are
accurately tracked and
reported to the state
in our annual nutrient
management report.''
Terry Baker.
Heather & Mike Lewis on Land Management
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In 2020, Heather and
Mike's exemplary
commitment to
environmental
stewardship was
recognized by the U.S.
Poultry and Egg
Association when the
couple was awarded the
Family Farm
Environmental
Excellence Award. The
prestigious award
reflects the industry's
commitment to serving
as responsible stewards
of land, water, and
feed management, and
maintaining and
advocating for the
humane treatment of our
most important asset:
our chickens. In their
own words, hear how
they approach their
commitment to the land
in particular reduce
time traveled,
emissions and costs.
This efficiency and
localization ties
directly to a reduction
of GHG emissions.
We practice no-till farming on our land to help prevent soil
erosion as well as protect the nutrients that are in the soil.
Leaving a crop residue on the ground and using a cover crop
also helps to improve soil health. The years that we have corn
in our fields, we save some of the fodder and grind it up into
new bedding for the chickens. We also use recycled pallets for
bedding. We bring a shredder in that has a large magnet on it--
in go the pallets, out comes nice bedding for our chickens.
Heather Lewis.
We have a Nutrient
Management Plan that is
written by a trained
engineer/agronomist.
The expert helps us
ensure that we are
doing what's best for
our soil and the land
around it. We windrow
our litter between
flocks letting it heat
up to kill any
pathogenic bacteria or
organisms and equalize
the moisture
throughout. Then we
reuse it, spreading it
back out for even
bedding.
Mike Lewis.
Land Leadership Profile
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Deerfield Farms
Jenny Rhodes, Farmer &
Owner
I am a 10th
generation farmer. I am
able to farm today
because the generations
before me took care of
the land the best way
they knew how. Today, I
am able to use the
latest research-based
information to make my
farm the most
sustainable it can be.
I have learned to lead
by setting an example
for other farmers to
follow.
Every day I am
thinking, ``What is the
next step in
sustainability?''
Artificial and machine
intelligence--even
remote sensing--will
help us as farmers and
growers become even
more efficient. I am
also very interested in
blockchain technology
to help trace food from
farm to fork. All of
this potential makes
this exciting and
important work.
We recently installed
pollinator plots on the
farm. The plots provide
nectar or pollen for a
variety of pollinators
like bees, butterflies,
and birds. We have a
few deer, groundhogs,
and turkeys that like
to graze the plants. My
grandchildren like to
walk in the plot, too.
This has reduced my
carbon footprint on my
farm, with no grass
cutting in these areas,
the plot is a cover
crop scavenging
nutrients, keeping soil
in place and improving
soil heath.
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Foster Farms
From Waste to
Agricultural Value
Much of the waste
material from Foster
Farms poultry ranches
is rendered into
byproducts that can be
used in cattle and
aquaculture feed as
well as pet food.
Each year, Foster
Farms poultry
operations produce more
than 450,000 tons of
manure almost all of
which is converted into
compost, soil
amendments,
conventional
and organic fertilizers.
Since 2016, Foster Farms has been working with local California
farmers to grow organic feedstock utilizing our organic fertilizers for
our organic poultry ranches thereby creating a renewable cycle of
sustainability. More recently, Foster Farms has begun working with the
Food to Fork project to develop feedstock from recovered commercial
food waste. Even feathers are finding a new use.
Owing to feather absorbency, Foster Farms is participating in a
U.S. Air Force project aimed at developing flotation mats that could be
used to clean up fuel spills over water.
Water
From the farm to market, water is required throughout the various
steps of broiler production--and water consumption (per kg of bird
produced) is down an additional 13% this past decade.
There are several ways that water is used throughout the production
process:
1. To water crops (namely corn and soybeans) for chicken feed
2. For the chickens to drink on the farm
3. To cool the birds via evaporative cooling cells during warmer
temperatures
4. To clean and rinse chicken carcasses at the processing plant
5. To clean and sanitize equipment at the processing plant
Water conservation is a pivotal part of running a successful
chicken farm. Farmers today monitor and record water usage to ensure
their flock is receiving the essential amount of clean water. Wells and
waterlines are sanitized on a regular basis. Following are some of the
innovative practices farmers implement to sustainably reduce, save and
recycle water on their farms:
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Computer Monitoring
Growout houses are equipped with computer systems that
measure and monitor water usage on the farm. Farmers diligently
watch for any abnormal water use patterns to help identify any
problems such as water leaks, which saves water.
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Nipple Dispenser Systems
Most modern chicken farms use ``nipple'' watering systems as
another watersaving tool. Nipple watering systems are pin-
activated water dispensers, much like a rabbit or hamster water
bottle with the ball bearing. When the birds press the pin,
water is released. This helps limit any water being spilled on
the poultry litter, or floor, and it only dispenses water when
the birds want to drink.
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Cooling Pads
Most grow-out houses are also equipped with cooling systems
that consist of cool cell pads, which evaporate water at one
end of the house and have large tunnel exhaust fans at the
other end. This not only keeps the chickens cool, but also
recycles water on the farm.
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The Role of Technology
at Processing Plants to
Improve
Air Quality and Water
Conservation
Enhanced air
handling systems and
ventilation to
boost air quality.
Modernized
water reuse, filtration
and treatment sys-
tems to conserve
water and increase
water efficiency.
Water Usage and Feed Conversion
Chicken feed is primarily a mix of corn and soybean meal that is
formulated by certified animal nutritionists. This ensures that each
bird gets the right nutrients at the right time. Nutritious feed
results in chickens requiring less food to grow. Chicken feed never
contains added hormones or steroids--it's the law.
Growing corn and soybeans for the production of chicken feed is the
largest source of water consumption in broiler production. The good
news, however, is that broiler production requires a very small amount
of feed.
The feed conversion for broilers (amount of feed needed to produce
1 kg of broiler live weight) is among the lowest in all of U.S. animal
agriculture. And the feed conversion ratio has decreased significantly
in the past decade.
As previously noted in this report, the industry has achieved an
8.7% improvement in feed conversion ratio for broiler production
(enabling a 21% increase in production with only 10.7% increase in feed
consumed).
All of these factors result in chicken requiring less feed and
water to grow to market weight, which results in chicken having less of
an environmental impact.
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Chickens are the most
efficient converters of
feed into meat of all
land-based livestock
species due to several
key factors:
Traditional
breeding
Nutritious
feed tailored to each
stage of a chicken's
life
Better
living conditions
through climate-
controlled
barns and new
technology, and
protection from ex-
treme temperatures,
predators and disease
Up-to-date
biosecurity practices
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Nutrient Management Plans and Water Quality
Farmers are required, by U.S. Federal law, to follow what are
called ``Nutrient Management Plans'' when fertilizing crops and
managing animal manure. These plans specify how much fertilizer,
manure, or other nutrient sources may be safely applied to crops to
achieve yields and prevent excess nutrients from impacting waterways.
Nutrient Management Plans are generally required for all
agricultural land used to produce plants, food, feed, fiber, animals or
other agricultural products, and serve as key mechanisms for protecting
water quality.
A specific solution that is widely used and helps protect water
quality is the use of heavy use area concrete pads (HUA pads) around
the entrances to grow-out houses. HUA pads help with water quality by
keeping litter from being washed away. Litter that farmers do not
immediately use is placed in a shed, which further ensures that the
litter does not enter local water sources.
In addition, farmers often minimize water runoff from their farms
(and emissions) by planting vegetative buffers between chicken houses,
which help to absorb any water, dust, or emissions on the farm.
Our Farmers Speak
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``The latest tech
allows us to check for
leaks in our
waterlines, conserve
energy usage, and flag
potentially harmful
ammonia levels. These
efforts reduce waste,
runoff and emissions.''
Rachel Rhodes.
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``We use waterline
technology to get
chickens the water they
need while limiting
waste or spillage.
These waterlines--
nipple systems--allow
us to be certain the
only water going into a
grow house is going
into the bird. With
this technology, we can
easily check that there
are no leaks.''
Michelle Chesnik.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
``I adopted
conservation practices
to reduce infiltration
of nutrients into
groundwater--like
construction of manure
storage buildings, use
of composters, and
plenty of HUAs.''
Georgie Cartanza.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
``Evaporative cooling
pads capture dew and
rainwater, recycling an
important resource and
saving energy. Natural
or applied heat to the
cooling pad releases
this stored moisture
and cools the chicken
house on hot days,
lowering our reliance
on additional energy
sources and cutting
costs.''
Janice Vickers.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
``Our farm has one
well for each of the
two chicken houses. By
monitoring and
recording the water
usage on the farm
daily, I can see how
much water is being
used, to ensure the
well-being of the
chickens without being
wasteful. Wells and
water lines are
inspected regularly,
and they are sanitized
at least twice a
week.''
Terri Wolf-King.
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``In the Chesapeake
Bay area of Maryland,
newly established farms
in the state are
required to have a
storm water management
plan, so we make sure
that all water leaving
the farm, including
water running off the
top of the chicken
houses, percolates
through a pond.''
Jenny Rhodes.
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``We installed a
number of bogs and
plant material to
filter water before it
leaves the farm. These
serve as environmental
buffers to guide,
utilize, and retain
rainwater. Grassy
swales help guide and
retain storm water and
plants maximize the
absorption of any
nutrients moved by
precipitation. We also
have a pond that isn't
just scenic--it
collects and holds much
of the rainwater that
falls here and is
regularly stocked with
a variety of fish to
keep it self-
sustaining.''
Terry Baker.
Water Leadership Profiles
Harrison Poultry
David Bleth, President & CEO
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
My favorite aspect of sustainability
initiatives is they actually reduce costs; they
do not increase them as many may believe.
We believe that clean potable water is our
most precious resource and conserving it is a
daily conscious effort. Whether at home or
work, repairing any dripping issues saves so
much water over time.
We have invested over $1 million in water
conservation equipment that has reduced our
company's water usage by 78 million gallons
annually.
Sanderson Farms
Stephanie Shoemaker, Manager, Environmental (Regulatory & Permitting)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Environmental and Engineering Departments
of Sanderson Farms collaborate to address water
conservation and other resource usage. Not only
is prioritizing sustainability critical to our
success, it is simply the right thing to do. A
prominent goal of ours over the next 5-10 years
will be to identify new methods to renew,
reuse, reduce and recycle waste from our
wastewater treatment and processing facilities.
Water Leadership Snapshots
Tyson Foods
Water In Context
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A specific example of
our current water
stewardship efforts is
the work we're doing to
establish contextual
water targets at
several of our plant
locations. Contextual
water targets consider
local environments and
conditions in order to
make meaningful change
in water usage. We've
currently implemented
targets at four
priority facilities and
will continue to
develop targets for
additional locations in
the future.
Simmons Foods
Clean Water: A Point of Pride
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Sparkling, clean water is a point of pride at
the Simmons Foods wastewater treatment facility
in Southwest City, Missouri. In fact, because
of the sustainability efforts of our team
members, 2 million gallons of clean, safe water
is released back into nature each day.
Simmons award-winning facility treats
wastewater from adjacent poultry and ingredient
processing plants. Since it's in a rural
setting without municipal infrastructure,
Simmons Foods built a system dedicated to
treating the daily volume of process water
flowing out of those production facilities.
As an industry leader that uses about 4 gallons of water per
chicken during processing, about twenty percent less than the industry
average, it's significant that Simmons Foods is not only using less
water, but also returning clean and safe water to Cave Springs Branch,
a tributary of Honey Creek and Grand Lake in Southwest Missouri.
Since 1982, Simmons team members treat water and liquid organic
matter called ``process water'' in compliance with Federal and state
environmental standards. Team members use physical, chemical and
biological processes to remove solids, bacteria or any other organic
matter before it is released about 350 yards from the processing
facility.
In addition to maintaining healthy aquatic ecosystems around
Simmons' Southwest City operations, the facility has achieved more than
2 decades without a notice of violation and has earned the U.S. Poultry
Clean Water award twice since 2008.
The water treatment facility is so effective, it's used to host
classes in partnership with the Crowder College Environmental Science
Program. In addition to students, community members, local leaders and
elected officials are invited to tour the facility to see the process
first-hand and hear about our commitment to sustaining the environment.
House of Raeford Farms
Prioritizing Water Wherever We Are
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Bob Johnson, CEO and
owner, along with a
dedicated board of
directors, have made
the quality of our
wastewater systems a
priority across the
company.
Under the oversight
of environmental
manager Chris Murray,
new and upgraded
treatment systems have
resulted in dramatic
improvements in
wastewater quality.
Since 2014, the
company has invested
nearly $20 million in
upgrading our
wastewater treatment
facilities at all
locations across the
Southeast U.S.
This has been a major commitment to safeguarding the environment,
especially in water conservation and pollution control.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Rose Hill, North Carolina
In 2014, we installed a new Diffused Air Flotation (DAF) system
at this processing plant in an effort to clean up our staging
lagoon and reduce the volume of Plant Available Nitrogen (PAN)
released on the spray fields. Within 3 months, the PAN level
decreased by over 50%, thereby reducing pollution
significantly. Rose Hill is continuing improvements to the
wastewater operation by expanding the amount of land used for
spraying treated water, thus reducing the concentration in any
one area.
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Wallace, North Carolina
We rebuilt this processing facility after a devastating fire
destroyed the plant in 2017. As a result, we decided to upgrade
the wastewater treatment operation to allow for future growth
and to install new equipment with the latest environmentally
friendly features. One of the most significant gains from the
improvements was the water reuse system that pushes back 80,000
gallons of treated water per day to the plant. This is a major
savings in annual water usage of over 20 million gallons.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Arcadia, Louisiana
To control the toxicity of treated wastewater, we added an anoxic
basin, the first ever used in the company, to reduce nitrates
and achieve toxicity testing compliance. This innovation
inspired upgrades in our Greenville, West Columbia, and
Hemingway, South Carolina, locations as well as our Forest
Park, Georgia, operation.
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Broiler Health and Welfare
From when baby chicks arrive at the farm, to the time when broiler
chickens are taken to be processed, the health and welfare of the flock
is a priority for chicken farmers and poultry companies.
Without healthy, properly cared for broiler chickens, there would
be no chicken industry. We recognize that we have an ethical obligation
to make sure that the chickens on American farms are well-cared for and
treated with respect.
Broiler health and welfare begin at the farm level. Chicken farmers
have long recognized the need to properly care for their animals.
The industry continues to innovate and improve animal husbandry
practices to help protect the birds' health, nutrition, care and
comfort during their lives.
NCC's Animal Welfare Guidelines Certified by Leading Welfare Auditor
Organization
To help ensure that broiler chickens receive optimum care during
their lives, NCC developed the NCC Animal Welfare Guidelines and Audit
Checklist, which have been widely adopted by chicken farmers and
processors. The NCC Welfare Guidelines were developed based upon the
opinions of the World Organization for Animal Health.
According to the World Organization for Animal Health Terrestrial
Animal Health Code, good welfare is when the animal is healthy,
comfortable, well-nourished, safe, and not suffering from pain, fear,
or distress. Animals must also be able to express behaviors that are
important for their physical and mental state. Animals' physical needs
are relatively easily discussed, described, and studied, but their
mental states and needs can be more difficult to characterize. We
recognize this understanding is an ongoing discussion and evolving
science. With that in mind, the NCC Broiler Welfare Guidelines are
updated every 2 years to include new science-based parameters.
------------------------------------------------------------------------
-------------------------------------------------------------------------
The NCC Welfare Guidelines define the following essential elements
of broiler chicken care:
Raised by personnel trained to properly handle and care for
the chickens
Access to adequate amounts of nutritious feed and clean
water
Room to grow and express normal behavior
Housing that provides protection from the environment,
disease and predatory animals
Professional veterinary care
------------------------------------------------------------------------
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The NCC Welfare Guidelines were
certified by the Professional Animal
Auditor Certification Organization
(PAACO), a leading authority on animal
welfare auditing, which provides high
quality training and certification
credentials for auditors and audits.
These guidelines cover every phase of
a chicken's life and outline
science-based recommendations for proper treatment. The guidelines are
updated every 2 years with assistance from an academic advisory panel
consisting of poultry welfare experts and veterinarians as well as
industry experts from across the U.S.
Chickens Today Are Healthier Than Ever Before
Chicken companies, farmers and veterinarians take pride in the way
they care for their chickens so much so that chickens today are as
healthy as they've ever been.
All current measurable data--livability, disease, condemnation,
digestive and leg health--reflect that the national broiler flock is
healthier than in years past.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Leadership Profile
Perdue Farms
Mike Levengood, Vice President, Chief Animal Care, Officer & Farmer
Relationship Advocate
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Perdue has been raising poultry for more than
100 years, and I have been for 37 years. We
have implemented many innovative technologies
that help us address birds' needs, such as
improved water systems, environmental controls
in the housing, and advances in animal care
that yield improved nutrition and health.
As part of Perdue's pioneering Commitments to
Animal Care that we rolled out in 2016, we are
continuously elevating the standards to which
our poultry is raised and remaining open and
transparent with our customers and consumers
who are interested in knowing about how
their poultry's quality of life.
My main daily focus is communication with our farmers and flock
advisors. Our team makes a great effort to not only ensure compliance
with our raising standards, but also to make sure that our farming
partners understand the ``why'' behind our drive to constantly raise
the bar. My goal is to foster our culture of dedication to animal
husbandry. At the end of the day, it's good for the farmers, the birds,
and the consumer.
Our thinking extends beyond the ``needs'' of our birds to include
their ``wants.'' We continuously look for ways to do more to keep our
birds happy--things like increasing natural light, enrichments and
outdoor access. We are also looking very hard at ways to refine our
processes, including how we move birds from the farmer's house to the
harvest plant, automate catching, and modernize stunning equipment.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Leadership Profile
Merck Animal Health
Jessica Meisinger, Ph.D., Veterinary & Consumer Affairs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
I've always loved animals and sustainability,
and this job has been the perfect melding of
the two. One of my favorite aspects of my role
is helping Merck be more sustainable and be a
better company. I interact and help connect all
of the pieces of the company. We are focused on
diversity, equity and inclusion, animal
welfare, veterinary well-being, anti-microbial
resistance in addition to reducing our
environmental impact.
The Merck Sustainability Team of Excellence is
cross-functional. People across the company
from the human pharmaceutical side to the ani-
mal health side are involved. We have a real opportunity to make a
difference in our products and packaging that promotes greater animal
health while achieving our sustainability goals. Packaging is a big
concern of our customers. One initiative we are working on is looking
at ways to reduce, eliminate or produce recyclable packaging for our
animal health products.
One of the biggest trends in animal health is incorporating new
monitoring and identification technologies. These new technologies are
bringing efficiencies to our customers' operations that are focused on
animal health and prevention. Innovations like these help us continue
to be the best and most sustainable company we can be.
In my personal life, living sustainably can be challenging because
I have a 2 year old and a 3 year old--but I want them to learn by
example and see everyone's efforts matter. Our family has started
composting, and we have a garden where we grow our own vegetables. We
buy a lot of items like clothes second-hand and use them for as long as
possible. I research and support brands that are socially responsible,
including Merck products.
What's Good for the Chicken Is Good for the Farmer
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Put simply, a farmer's
livelihood depends on
the health of their
flock.
Farmers dedicate their
lives to the safety and
health of their
chickens and, with
that, Americans can
feel secure about the
meat they are buying
for themselves and
their families.
There is a tremendous
amount of science and
animal husbandry that
goes into breeding and
raising today's chick-
ens.
Through traditional breeding, breeders ensure bird size and growth
rate never comes at the expense of the birds' health or welfare.
Farmer Profile
Rachel Rhodes
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Our top priority as
farmers is 100% focused
on our birds' health
and well-being--
watching our freshly-
hatched chicks arrive,
caring for them, making
sure that they have
enough food and water,
and that they have the
perfect environment to
grow and thrive so we
can provide healthy,
affordable food for the
consumer.
The health of our
birds is just as
important as the health
of our children,
because our birds are
just like our children.
When our children
aren't feeling well, I
make a little
`treatment sheet,' detailing when they receive medication, how much
they are given, etc. The same goes for our birds. When they aren't
feeling well, we carefully monitor how much water they drink, if
they're not as active, if they're given a probiotic, and how much
they're given.
These practices ensure that we're proactively meeting the well-
being of our birds by providing them with the care and commitment that
we would give our own family.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
How Do Chicken Farmers, or Contract Growers, Partner with Chicken
Compa-
nies?
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
A contract chicken
grower is an
independent farmer who
chooses to invest and
build chicken houses,
working under contract
with a chicken
production and
processing company to
raise chickens for
them.
More than 90% of all
chickens raised for
meat in the U.S.
(broiler chickens) are
raised by contract
farmers, who are
thriving in helping to
produce America's No.
One protein. In fact,
chicken companies have
waiting lists of
potential family farms
who want to partner
with them and enter
into the chicken
business.
Chicken companies
work closely with their
farmers to build
relationships based on
a shared goal of
success, and these
relationships have
helped family farms
succeed.
This system has
allowed us to insulate
farmers from the risk
of changing market
prices for chicken and
feed ingredients, such
as corn and soybean
meal, which represent
the vast majority of
the cost of growing a
chicken. In other
words, farmers are guaranteed a consistent price for their efforts, no
matter what the markets are doing.
Those who perform better receive bonuses. The system has worked
well for decades and kept tens of thousands of families on farms who
otherwise would have had to get out of agriculture altogether.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Farmers take on about 20% of the cost of raising a flock
Ongoing Commitment to Research and Improving Broiler Care
For decades, chicken producers have evolved on-farm care,
transport, handling, processing and genetics to improve welfare
outcomes while meeting everchanging consumer preferences.
Whether it's looking at space and housing, studying different
nutrition programs, breeding for the healthiest birds, or working to
eradicate diseases, the industry remains committed to continual
improvement to do what is best for the bird, and ultimately, the
consumer.
------------------------------------------------------------------------
-------------------------------------------------------------------------
The Role of Technology at Processing Plants to Enhance Animal Welfare
Installed cameras and monitoring systems to observe the handling of
the birds to optimize their welfare and offer auditing transparency.
------------------------------------------------------------------------
Tyson Foods
Leading the Way In Animal Welfare Through the Tyson Foods Broiler
Research Farm
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Tyson Foods' Broiler
Welfare Research Farm
is a testing ground for
research on key aspects
of broiler chicken
welfare, such as
lighting, enrichments
and stocking density.
The research is based
on an approach that
allows animal choice to
guide our actions.
Because chickens can't
tell us what types of
housing they prefer, we
create a variety of
options within one
environment and then
observe animals'
behavior. We use a
science-based approach
to evaluate the impact
of the different
choices on measurable
outcomes of animal
welfare and health.
We are conducting
ongoing research of the
optimum lighting
conditions for
chickens' welfare.
Findings suggest birds
are best able to
display their natural
behaviors in
housing with a gradient lighting from bright to subdued, so they can
feed in the bright area and rest where there's less light.
We're also conducting ongoing enrichments research to evaluate
natural behaviors. Objects like ramps, huts and boxes are placed in the
house to provide a more interesting or ``enriching'' environment for
the chickens. Initial results of the research have shown a strong
preference toward the huts.
Employee Safety and Wellbeing
The U.S. chicken industry puts safety above all else. We are always
looking for ways to improve safety across the supply chain in order to
keep our employees safe and supported.
Our collective commitments and investments in safety have made a
big difference over the years, especially in processing plants. Chicken
processors continue to focus on the prevention of workplace injuries.
By acknowledging the benefit of implementing ergonomics and medical
intervention principles, while continually implementing new technology
and automation in the workplace, processors have dramatically improved
employee safety.
The Industry's Safety Record Speaks for Itself
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The poultry processing sector has achieved an 86% decline in
Occupational Safety and Health Administration (OSHA)
recordable injuries and illnesses over the past 25 years,
and injuries and illnesses continue to decline, according
to the most recent report released by the U.S. Department
of Labor's Bureau of Labor Statistics (BLS).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The total recordable poultry processing illness and injury rate
for 2019 was 3.2 cases per 100 full-time workers (per
year), down from 3.5 in 2018. This was below the total
recordable illness and injury rate for the entire food
manufacturing sector, which was 4.0 cases per 100 full-time
workers per year.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In fact, injuries in poultry processing have fallen below the
levels of ``all manufacturing,'' not just food
manufacturing, for the first time since OSHA began
recording rates.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Leadership Profiles
Pilgrim's
Lisa Burdick, Head of HR, Safety and Operational Excellence
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Lisa Burdick says
that diversity is one
of the company's
greatest strengths: Our
life experiences are as
unique as we are, but
we all have one thing
in common: we've found
opportunity here. A
perfect example of this
is Jordan Shaw,\2\ a
production supervisor
at our Nacogdoches,
Texas, facility.
---------------------------------------------------------------------------
\2\ https://jbsstories.jbssa.com/2021/04/11/jordan-shaw/.
---------------------------------------------------------------------------
In 2016, Shaw found
himself homeless and
sleeping in a park. He
started on the cone
lines at Pilgrim's
cutting shoulders, but
he wanted to show the
team that he was a hard
worker, a team player
and he could motivate
the people around him.
Jordan's determination
led him to earn
Employee of the Month, and shortly after, he became a lead person on
the production floor.
Jordan says working at Pilgrim's taught him discipline and
transformed him into a role model for his family. Our team members,
like Jordan, are what I love about my job: helping open doors of
opportunity.
OK Foods, a Bachoco Company
Bryan Burns, General Counsel and Vice President, Environmental Health
and Safety
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In late 2018, I was
asked to lead our Risk
and EHS Department. Our
EHS, Operations, and
Human Resources Teams
collaborated and
engaged in coordinated
efforts to promote a
safety culture within
our company and to
reduce our injury
rates. In a 2\1/2\ year
period, we have
achieved more than a
50% reduction in our
OSHA recordable
injuries, and our OSHA
and DART rates are now
better than industry
averages. We did this
through a boots-on-the-
ground approach that
included eliminating
hazards, improving
training, and
encouraging employees
to report any hazards
or concerns. Most
recently, we began
regular
wall-to-wall inspections by the CEO and other members of the Executive
Team, who walk through the facilities alongside our hourly team members
to identify potential hazards and listen to their concerns.
For us, sustainability starts with protecting our own people and
making sure they have a safe and healthy workplace. We believe nothing
we do at work is more important than taking care of each other.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Role of Technology at Poultry Processing Plants to
Enhance Employee
Safety
Computerized rehang, portioning, and debone
machines to decrease re-
petitive motion issues and protect workforce safety
Harrison Poultry
Researching Innovative Tech Solutions to Improve Employee Safety
At Harrison Poultry, we are going all-in on several artificial
intelligence robotic projects. We have a team of engineers and industry
veterans at our company who work together to brainstorm possible
project ideas, and then give them the freedom to pursue them. Also, we
are heavily involved with state university engineering departments,
partnering on various cutting-edge projects.
We believe artificial intelligence machines that have the ability
to teach themselves how to improve on their daily performance is the
most exciting 5 year trend. Vision system technology that communicates
directly with equipment is starting to impact our world in really
positive ways. Plus, we are developing ``smart'' machines that will be
able to do the strenuous, heavy lifting, which will take the burden off
our workers and help to keep them safe.
Evonik
Highlighting the Sustainability Benefits of Bulk PAA in the Protein
Industry
Poultry processors use peracetic acid (PAA) solutions to maintain
food safety compliance. Peracetic acid is the most widely used
antimicrobial chemistry within the U.S. poultry industry. Over the past
decade, expanded regulation and additional treated applications
resulted in larger volume usage of PAA in processing plants. This
increased volume, combined with a drive to improve safety and
efficiency, led to the implementation of our bulk system, which
provides a safe and sustainable solution to processors.
Our first bulk system was installed at a customer site in 2012.
Since then, we have transitioned much of our product volume to bulk and
safely installed our systems at over 20 locations. Bulk delivery of PAA
eliminates the need for one-way totes--and that's a big deal in terms
of what's good for poultry customers, our business, and the
environment.
From an environmental footprint perspective, in addition to the
tote materials, there are also significant transportation and water
waste aspects to consider. Totes are shipped between manufacturing,
customer, and recycling facilities, and these totes must be rinsed
multiple times during their lifespan. These material, transportation,
and water savings may seem meager, but consider that just one poultry
bulk customer facility eliminates over 1,300 totes annually through
this program.
Keeping Workers Safe and Healthy During the Pandemic
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As COVID-19 stay-at-
home orders expanded
and increased demand
for fresh chicken
resulted in empty
grocery store shelves,
thousands of industry
workers answered the
call as federally
designated frontline
workers to help meet
the demand. Workers
showed up to help
maintain a steady
supply of food to keep
our fellow Americans
fed, and collectively
our industry worked
diligently to keep them
safe.
Chicken companies are
keeping workers safer
than ever because of
additional protective
measures adopted in
response to COVID-19.
Companies have been
following CDC and local
health department
guidelines. Many have
also consulted with
infectious disease
physicians to develop
site plans.
Their heightened
protective measures
include:
Increasing
cleaning and sanitation
frequencies and in-
tensities for
equipment and common
areas, such as
the breakroom and
vending machines, at
processing
facilities.
Increasing
frequency of
handwashing/sanitation
and
expanding access to
hand sanitizing
stations.
Encouraging
employees to stay home
if they are not
feeling well or
believe they may have
been exposed to
the virus, while
still receiving pay.
Heightened employee screening for any signs of illness,
including temperature checks before entering the plant.
Practicing social distancing not only in common areas, such
as breakrooms and cafeterias, but also on production lines
where possible.
Implementing travel restrictions and only allowing essential
personnel into the plant.
Educating employees about the virus and ways to avoid
catching it, along with posting [] educational information in a
variety of languages.
Training company nurses on CDC protocols for COVID-19.
Providing personal protective equipment (PPE), including
masks and gloves, installing plastic dividers between
workstations and in breakrooms.
Supporting Employees' Overall Wellbeing
We recognize that supporting our employees is a broad
responsibility, which covers much more than safety programs, training,
and other hallmark protections of safe workplaces.
Chicken companies are finding additional ways to care for employees
and their families--to show appreciation for hard work in helping to
support an entire nation, and to support employees' health and
wellness.
Although policies vary, companies are doing things like offering
paid sick leave, bonus/hazard pay and free chicken for employees,
waiving the waiting period for short-term disability, and making
personal time off policies more flexible.
Fieldale Farms
Prioritizing Employee Health and Wellness
Fieldale Farms is prioritizing health and wellness by establishing
Fieldale Family Health Centers to provide employees and their families
with low-cost medical services. Starting in 2004, Fieldale Farms
established a family health center in Baldwin, Georgia. It was such an
overwhelming success in meeting employees' needs that Fieldale opened a
second family health center in Gainesville, Georgia, in 2012, and then
a third one on-site at the Fieldale Murrayville, Georgia, processing
plant in 2020.
The Fieldale Family Health Centers provide a comfortable, inviting,
and easy access point for employees and their families to seek care.
The cost for medical treatment at these centers is only $15 per visit,
and many are open for extended hours to provide medical services for
employees working all shifts.
Employees also get access to nutritional counseling, diabetes
counseling, tobacco cessation products and services, and gym
memberships. Every year over 500 employees take advantage of free
mammogram services.
Perdue Farms
Caring for Employees During COVID-19
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Take a look at how
Perdue Farms responded
to care for their
workers during the
pandemic:
We extended the hours
of many of our on-site
Wellness Centers, which
are staffed with local
healthcare providers
and are available to
our associates and
their families free of
charge.
We provided
support to associates
who were directly
impacted--either
due to illness or CDC-
mandated
quarantine
requirements.
We
maintained an ongoing
dialogue with
associates
and our communities
about the impact of
COVID-19
on our business and
provided important
information to
our associates in
multiple languages to
educate them
on safety
requirements and CDC
best practices for
when they were at
work, at home, and out
in the com-
munity.
We
temporarily waived the
5 day waiting period of
short-term
disability for any
associate who contracts
COVID-19, so that he or she could receive immediate benefits.
All hourly associates received a temporary $1 per hour pay
increase and all Piece Rate associates, such as truck drivers,
a $40 per week pay increase.
We fully funded our annual Profit-Sharing Bonus Program
payout to eligible associates 2 months early.
Because the pandemic caused many associates to cancel their
vacation or personal time off (PTO), we temporarily removed the
PTO accrual maximum for all associates until July 6, 2020.
We provided our production associates with food products to
take home for themselves and their families.
Through our partnerships with local and state health
organizations, we worked persistently to fulfill our commitment
to provide all associates access to a vaccine.
Perdue Farms
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Mentoring Young
Farmers to Support
Their Development and
Long-term Success
As part of Perdue
Farms' desire to be the
Farmer's Choice, Perdue
Farms will launch a
young farmer
development group in
recognition of their
distinct needs.
In consultation with
young farmers, Perdue
Farms will explore
their priorities for
mentoring, information
and en-
gagement, and establish a program to support their development and
long-term success.
Pilgrim's
Investing In the Futures of Team Members, Their Families and
Communities
Throughout the global pandemic, Pilgrim's team members and
communities have looked to Pilgrim's for reassurance during the crisis.
Toward that end, Pilgrim's has committed to providing $20 million of
meaningful investments in projects that have a lasting impact in our
communities for generations to come. Pilgrim's is committed to
supporting ongoing learning and professional development.
In March 2021, Pilgrim's launched the Better Futures Program to
provide meaningful investments in the futures of team members, their
families and communities. The company is building the largest free
college tuition program in rural America. The Better Futures Program
provides team members and their child dependents the opportunity to
pursue their higher education dreams for associate degrees and trade
certificates at community and technical colleges tuition-free. ``We
recognize and believe in the transformative power of higher education
and the opportunities that come from education, coursework, and
technical skill training.''
As of July 2021, more than 1,250 team members and dependents have
enrolled in community colleges across rural America as part of the
program.
Tyson Foods
Providing Frontline Team Members With Job Skills Training and
Workforce Certifications
At Tyson Foods, a key way we support our frontline team members is
through Upward Academy--an innovative education program we created to
help team members develop important life skills. In FY 2020, we
increased the number of locations offering free and accessible classes
in English as a Second Language (ESL), General Educational Development
(GED), citizenship and financial and digital literacy to 59 locations.
When the COVID-19 global pandemic disrupted in-person classes, Upward
Academy pivoted to offer virtual classes so team members could continue
their education.
We also launched Upward Pathways, a new approach to create
opportunities for upward mobility to team members who exit Upward
Academy or those who are not fully utilizing their skills and
experience and looking for a next step. These career pathways leading
to advanced training and opportunities are a first for Tyson Foods. The
addition of Upward Pathways gives all team members access to a robust
and equitable career pathway, strengthening an internal pipeline of
skilled team members in an increasingly complex production environment.
Food and Consumer Safety
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Americans eat more
chicken than any other
protein--approximately
160 million servings
every day. In addition
to being nutritious and
affordable, chicken
producers spend
considerable time and
resources to make sure
our products are as
safe as possible and
meeting stringent U.S.
Department of
Agriculture (USDA)
standards.
Our Strong Food Safety
Record
The U.S. chicken
industry has an
excellent food safety
record. Our industry's strong safety record is based, in part, on
strict Federal monitoring and inspection.
------------------------------------------------------------------------
-------------------------------------------------------------------------
All chicken produced in the United States is closely monitored and
inspected by the USDA's Food Safety and Inspection Service (FSIS)
------------------------------------------------------------------------
The FSIS is the public health agency in the USDA that is
responsible for inspection at chicken processing facilities.
Federal inspectors are present at all times during operation in
chicken processing plants. In a federally inspected slaughter
operation, every bird is inspected, and inspectors have the authority
to stop production for food safety violations. The U.S. meat and
poultry inspection system complements industry efforts to ensure that
the nation's commercial supply of meat, poultry, and egg products is
safe, wholesome, and correctly labeled and packaged. Food safety
standards are applied to all chicken products produced in the U.S.
Applying Effective Food Safety Controls
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To comply with food
safety standards and
protect consumers,
organizations across
the entire broiler
value chain implement
food safety management
controls. Standard
operating procedures
include quality
assurance and food
safety training,
sanitation protocols,
hazard controls, and
interventions that are
designed to eliminate
or reduce foodborne
pathogens.
While recalls are
rare, our industry has
robust trace-back and
trace-forward
capabilities to ensure
that products can be
identified, if needed,
and promptly removed
from
the marketplace. Our industry also performs a comprehensive root cause
analysis to identify in the issue in the system that resulted in the
recall and to prevent future incidents.
Improving Food Safety through Research and Investment in Innovative
Technologies
Poultry companies have invested tens of millions of dollars in
technology and other scientifically-validated measures to enhance the
safety of chicken products. By supporting food safety research and
applying the best science, research and technology available, the
entire industry is better equipped to break the chain of foodborne
illness at every stage of production.
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We're working every day to improve:
Expanded and more sensitive
detection technologies for pathogens
Continued research and focus on on-
farm and in-plant interven-
tions to control pathogens
Expanded use of robotics, imaging
systems, sensors, etc.
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Tyson Foods
Ensuring Food Safety, While Conserving Water
Water conservation is a leading sustainability challenge that
Tyson's Food Safety and Quality Assurance (FSQA) team is working to
address as part of our management of food safety and quality. USDA
regulation prescribes specific conditions under which water can be
reused for the same purpose (i.e., chilling or washing). That said,
there is some need for technical expertise in developing the parameters
for the reuse as we have food safety objectives that must be
considered. This is where the FSQA team leads. We work collaboratively
with the plant operations, engineering, environmental, and laboratory
services to identify the best applications and methods for water reuse
while addressing the regulatory requirements for demonstrated reduction
in microbiological, physical, and chemical concerns.
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Key Role Consumers Play
In Ensuring Food Safety
We all play an
important role in
ensuring food safety
for our families. Here
are some important
steps you can take at
home to significantly
reduce any risks of
foodborne illnesses:
Clean--Wash hands and
surfaces often.
Separate--Don't
cross-contaminate. Use
a separate cutting
board for raw chicken.
Do not rinse raw
poultry in the sink.
Cook--Cook chicken to
165 Fahrenheit.
Chill--Refrigerate
promptly.
Instructions for safe handling and cooking are printed on every
package of meat and poultry sold in the United States. For additional
information on safe handling and cooking practices, visit The
Partnership for Food Safety Education's The Fight BAC!'
site.\3\
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\3\ https://www.fightbac.org/.
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Chicken Check In: Where You Can Learn More About the Chicken You
Serve
to Your Family
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When the National
Chicken Council first
introduced Chicken
Check In over 5 years
ago, it was one the
first resources in the
industry to offer a
consumer-friendly and
transparent look at
chicken production in
the U.S. Chicken Check
In remains a key
resource where
consumers can learn and
see how broiler
chickens are raised and
get answers to
frequently asked
questions about all
things chicken.
For additional
information on how
broiler chickens are
raised and produced,
and the benefits and
safety of eating
chicken, visit Chicken
Check In.\4\
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\4\ https://www.chickencheck.in/.
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Community Support
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Our members may feed
the nation--and the
world--but they are
acutely aware of their
reliance on local
talent and passion in
the communities they
call home. Our broader
ambitions and hopes for
this industry are
meaningful and possible
only to the extent that
we are anchored on the
best interests of the
places and unique
cultures where we
create our livelihoods.
In this section you
will find some poignant
examples of the
commitments our members
make daily to assure we
collectively play a
visible, positive role
in our communities.
Pandemic Giving and
Beyond
Throughout the
pandemic and 2020,
chicken companies
all around the country gave back--and continue to give back--to their
local communities by making donations to food banks, soup kitchens,
local health care facilities, police, and fire stations. Companies are
providing free chicken for their employees so they don't have to look
for it in the store. Every weekend, you can find a company selling
chicken at reduced prices right out of trucks in the local community.
In coordination with Meatingplace News, we have compiled a snapshot of
NCC member community donations in 2020. This does not represent every
commitment by every member, but provides a rough estimate of meals--and
hope--delivered in a challenging year.
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2,540,000+ pounds of protein
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132,800,000+ million dollars
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981,000+ in grants
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22,000,000+ meals
Mountaire Farms
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Giving Back to Local
Communities
During COVID,
Mountaire Farms was
dedicated to helping
feed the communities
where we do business.
When food was
disappearing from store
shelves as people began
panic buying, we
stepped up to help--and
we were determined to
make sure that our
local communitywas fed
first.
We partnered with one
of our customers,
Hocker's Super Store,
and brought a truckload
of chicken to the
parking lot to sell
directly from the back
of the truck so
customers didn't even
have to leave their
vehicles. It proved so
popular our company
began partnering with
local fire departments
and churches who kept a
portion of the proceeds
as a fundraiser. We
held dozens of
truckload sales events
across multiple states
on the East Coast.
Additionally, we
donated almost a
million pounds of
chicken to first
responders, health care
workers, and those in
the community who were
laid off during the
pandemic.
Our Mountaire Cares
program works with
numerous nonprofits and
community groups to
benefit the community.
Our quarterly service
projects involve making
a big impact through
volunteer efforts with
groups like the Boys
and Girls Club and
Habitat for Humanity.
Our signature event--
Thanksgiving for
Thousands--prepares a
complete meal in a box
and we've fed more than
a million people in
the 26 years we've been organizing this event. We've expanded to
Christmas and Easter, too. Every month, our food pantry program
delivers free chicken to more than 40 organizations that rely on our
chicken to feed people in need.
Elanco Animal Health
A Foundation That Feeds
While Elanco has long committed to caring for the health and well-
being of its employees, customers, animals and the communities in which
they operate, 2020 brought about heightened challenges. In the U.S.,
the Elanco Foundation awarded grants to several food banks to purchase
900,000 pounds of food that provided nearly 750,000 meals for hungry
families. Additionally, a grant from the Foundation to the European
Food Bank Federation helped address [heightened] EU food security needs
by funding the installation of cold and frozen storage rooms at three
food banks in the Czech Republic and one in Greece, and the purchase of
two refrigerated delivery trucks, one in Estonia and one in Lithuania.
Established in 2019 by Elanco Animal Health, the Elanco Foundation
amplifies the company's philanthropic impact by improving the well-
being of people and animals around the world. The Foundation is
committed to advancing sustainable growth by making strategic
investments in programs focused on promoting food security and the
human-animal bond.
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Established in 2019 by Elanco Animal Health, The Elanco Foundation
is a private, corporate foundation that amplifies Elanco's
philanthropic impact by improving the well-being of people and animals
around the world.
The Foundation is committed to advancing sustainable growth in its
focus areas of human-animal bond, food security and the environment.
Its ability to pivot in 2020 with a strong focus on food security
proves the Foundation's flexibility and resilience will be able to help
others for years to come.
Perdue Farms
Delivering Hope to Our Neighbors' Amid the Pandemic
As a food company, we are uniquely positioned to help thousands of
Americans experiencing food insecurity amid the pandemic through our
``Delivering Hope To Our Neighbors''' initiative.
Since 2000, Perdue Farms has partnered with Feeding
America' and its network of food banks to help neighbors in
our communities who are struggling with food insecurity. During our
Fiscal Year 2020, we delivered more than 86 million pounds of protein
to regional food banks serving our communities--the equivalent of 71
million meals. Perdue Farms was one of the first meat companies to
implement a formal program for ongoing donations of perishable protein
products, creating a model for other companies to follow.
Since March 2020, Perdue delivered more than 4 million pounds of
protein to support food bank pandemic-relief efforts in our communities
and beyond, and in support of frontline healthcare workers, first
responders, and community-based hunger-relief programs.
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Throughout the pandemic, Perdue Farms provided support to its
neighbors in numerous ways.
One of the co-founders at West Annapolis Pop Up Pantry, Diana Love,
a recipient of 33,000 Perdue Farms protein meals in 2020 states
perfectly the reason our food bank work is so important: ``Hungry
bellies can't fight illness, foster children's growth or contribute to
productive lives. This donation helps our families do all of these
things.''
Wayne Farms
One Nurse, Many Families, Amazing Impact
Dobson is a small community in the foothills of the Blue Ridge
Mountains and home to a Wayne Farms processing plant. When COVID-19 had
a ripple effect, both professionally and personally for Wayne Farms
team members, Candace Wilmoth became her own pebble in a pond to create
rings of influence, positivity, and to meet the moment with creative
thinking and action.
As a nurse at the facility and accustomed to providing on-site
medical care for any number of needs on a given day, Candace knew that
unprecedented times called for unprecedented measures.
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Caring doesn't start and stop at the front door. It's
something I've always been drawn to, and whether it's at the
plant or in our community, I can't help but extend a hand when
I see a need. I'm just one person but each person has the
ability to make a big difference if they want to.
Candace Wilmoth, Nurse at Wayne Farms
Internally, along with a group of team members who made-up a
``COVID-19 Vaccine Task Force,'' Candace leveraged county relationships
and collaborated to hold vaccination events, and oversaw the
coordination of transportation and logistics to make getting vaccinated
easier, for those who wanted it.
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Outside, in her
community, Candace saw
area families
struggling with new
distance learning
requirements. Many did
not have access to the
technology or supplies
they needed. In
response, Candace
organized fundraisers
and collection drives
for computers,
notebooks, pens,
earbuds, and other
school supplies needed
for online learning. As
a result of her
leadership, Wayne
Farms' Dobson facility
donated $10,000 to the
Surry County School
system. All her
efforts made a significant impact for her Dobson team members and area
families.
Candace Wilmoth is just one example among many who take to heart
the company's philosophy of ``Amazing Starts with Me.''
Just one idea, one person, one step forward can lead to bigger and
better ideas for our companies and communities.
Candace's leadership is a positive example of how the chicken
industry improves the lives of many, each day.
Leadership Profiles
House of Raeford Farms
Dave Witter, Manager, Corporate Communications & Sustainability
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I have always been passionate about
outreach to those in our communities
needing assistance.
Through my work with our nonprofit
organization House of Raeford Farms
FLOCK, I have been able to contribute
to the company's continuing efforts in
food security and youth development
especially.
Driven by compassion for others,
FLOCK walks alongside folks who are
already doing great work in their
communities and supports them in their
mission. We believe companies in our
industry
that do well should also do good.
Wayne Farms
Candace Wilmoth, Nurse
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During a time when so many could have
just given up, I witnessed quite the
opposite.
Through my personal experiences at
Wayne Farms in Dobson, North Carolina,
I have seen people really show up when
they did not have to. For example,
community chicken sales, fundraisers
for school supplies, canned food
drives, and just being present to
ensure our world of poultry kept
turning during a pandemic.
Witnessing that unity and teamwork
for the greater good is life-changing,
honestly. It was an honor to be a part
of it all. It made
us all stronger.
Pilgrim's
Brian Paulsen, Head of Environment
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Our facility
environmental teams
work to be active
stewards in the local
community environment
efforts and wildlife
management. In 2020, we
helped manage local
tree planting events
with 19 elementary
schools, planting more
than 500 trees. It was
great to see the
younger generation's
excitement about
environmental
stewardship.
Aviagen North America
Sara Reichelt, Director of Animal Welfare and Sustainability
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We regularly engage
in local environmental
outreach programs and
recently teamed up with
a local high school in
Elkmont, Alabama, for
an outdoor clean-up to
help the school prepare
to grow vegetables,
while giving students a
space to be proud of.
No sustainability
action is too small to
make a difference.
Zoetis
Jeff Sizelove, Senior Vice President, U.S. Poultry
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This year, Zoetis announced long-term
sustainability goals as our Driven to Care
initiative. While sustainability has always
been a part of our business, Driven to Care
guides how we integrate sustainability in all
aspects of our strategic business planning and
resource allocation. It focuses on three
strategic areas:
1. Communities (Care and
Collaboration)
2. Animals (Innovation in Animal
Health)
3. Planet (The Drive to Protect Our
Planet)
Under each of these areas, we will build upon our experiences in
supporting communities when disasters strike; increase veterinary care
for animals in emerging markets; provide innovative solutions that
assist productive and sustainable farms; combat diseases that pose the
biggest risks to animals and humans; and minimize our operations'
impact on the planet, including rethinking our packaging to reduce its
environmental footprint.
By supporting and partnering with our customers, colleagues,
communities and the people who care for animals, we achieve more by
working together toward our common sustainability goals.
Food Security
We recognize that food is a basic human need and fundamental right.
Everybody needs, and deserves, reliable access to sufficient safe,
affordable, and nutrient-dense food. This is food security.
Unfortunately, food security is a serious challenge for many people,
both in the U.S. and around the world.
As chicken producers, we play an important role: supplying the
world with safe and nutritious food. Over the past decade, we have
expanded chicken production dramatically to meet growing demand. We now
produce 21% more chicken by weight than we did 10 years ago.
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Our chicken is not only feeding Americans, but people all over
the world. In 2020, Broiler exports totaled 7.4 billion
pounds.
Providing Americans and People Around the World with Affordable,
Nutritious Protein
According to the 2020-2025 Dietary Guidelines for Americans,
chicken is a lean protein food that can help people across all life
stages.
Provides vitamins and minerals involved in brain function
Builds muscle
Promotes heart health
Strengthens bones
Aids in weight loss
Continuing Our Efforts to Enhance Food Security
Our industry is positioned to help enhance food security. CEO Jan
Henriksen of global poultry breeding company, Aviagen, says it well:
Our challenge [as a society] will be to feed the world's
expanding population with a reliable and quality source of
nutrition, while reducing the effects of production. One
promising source lies with poultry.
We are continuously looking for ways to improve the world's food
systems--through collaborations and support for our members--to help
ensure that everyone has reliable access to the food they need and
deserve.
The pandemic shed a harsh light on the ongoing issue of food
insecurity. For many Americans, the pandemic forced thousands
of people to seek assistance with putting a meal on the table
for the first time. As a food company, Perdue Farms was
uniquely positioned to help.
Applying Biosecurity Measures to Safeguard Health
One way that our industry seeks to enhance food security is by
implementing what are called ``biosecurity measures.'' Biosecurity
measures are things we do, as part of chicken production and care, to
reduce the risk of introduction and spread of diseases. These
activities and innovations go hand in hand with veterinary care to keep
our birds healthy while also reducing the need for antibiotics.
Zoetis
Jeanette Ferran Astorga, Head of Sustainability and President of the
Zoetis Foundation of HR, Safety and Operational Excellence
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As Head of Sustainability at Zoetis
and President of the Zoetis Foundation,
I spearhead our commitments to
communities, animals, and the planet,
which we recently formalized through
Driven to Care, our long-term
sustainability initiative.
We believe that healthier animals
make a healthier world, and our
sustainability aspirations build on our
purpose to nurture the world and
humankind by advancing care for
animals.
We recently announced a $35 million
commitment through our newly-formed
Zoetis Foundation, which will focus its
grantmaking
on strategic priority areas to enable thriving professions and
livelihoods for veterinarians and farmers.
As the leading animal health company, Zoetis is uniquely positioned
to drive a healthier, more sustainable future for animals, people, and
the planet. For example, our African Livestock Productivity and Health
Advancement (A.L.P.H.A.) initiative is helping us achieve one of our
aspirations to grow access to veterinary care in emerging markets.
Through innovative solutions, diagnostics and education, Zoetis is
making an impact not only for smallholder farms and veterinarians, but
for entire communities.
In Africa, we've committed to treating 200 million chickens with
positive implications on smallholder livelihoods, food security and the
environment by 2025. In the 4 years since A.L.P.H.A.'s inception, we
have administered 1.7 billion doses of vaccines and medicines,
established ten serology labs, and reached hundreds of thousands of
farmers, veterinarians and para-veterinarians through training
programs.
True leadership in sustainability requires innovation. One example
is our collaboration with Colorado State University, where we have
established the Zoetis Incubator Research Lab to explore the livestock
immune system and target new immunotherapies--paving the way for new
alternatives to antibiotics in food-producing animals, as a way to
combat diseases that pose the biggest risks to animals and humans. The
initial focus is biotherapeutics for cattle, which could yield broader
implications for pigs and poultry.
We're also committed to helping our customers achieve their
sustainability goals with healthier, more productive chickens. As an
example, in ovo vaccination with our Embrex'
Inovoject' and Embrex' Inovoject'
NXT' biodevices helps provide effective immunization results
and supports better bird health and welfare, as well as increasing
hatchery efficiency.
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Teaching Others to
Produce Chickens
Knowledge of best
practices also supports
food security. With
decades of experience
and expertise, the U.S.
chicken industry is the
foremost expert in
chicken production
We know how to
produce chickens
sustainably and safely.
And, while we export
our U.S.-produced
chicken to people all
over the world, we also
go to other countries
to teach local farmers
to better care for
their own birds.
By doing so, we empower these farmers to improve food security for
themselves, their families and their communities.
Cobb Vantress
Leasea Butler, Director of Business Development
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I've always had a passion for caring
for animals, which came from a deep-
rooted culture in my family. Although
my parents worked in plumbing, it was
the family farm that had my heart. I
didn't know then that bottle-feeding
calves and butchering chickens on the
farm would lead me to a life serving
others.
Farm life was not easy, but I loved
it, and I would learn much later in
life a word to describe my passion for
agriculture. I didn't know after high
school where I was heading, but I knew
I sought knowledge of animals. So,
straight off the farm to school I went
to
study poultry science at the university. I learned so much through
school, but my 20+ years at Cobb Vantress have given me the opportunity
to fill my ``life book'' with not only knowledge about chickens, but
knowledge of cultures, people, differences, and how agriculture and
poultry intertwine to bring us all together.
Recently, Cobb has allowed me the opportunity to take my book of
knowledge to African communities to teach others about sustainable food
production and agriculture, leading me back to my roots.
Specifically, 2 years ago, I had the opportunity to volunteer in
Mozambique. During a project focused on global sustainability and
agriculture development in rural East Africa, I taught farmers how to
meet the nutritional, health, and husbandry needs of chickens. This in
turn allowed the farmers to care for the birds to provide their
families with nutritious protein from locally grown chicken meat or
eggs. Business skills were also taught to the farmers to encourage best
management practices and economic practices.
Farmers not only use the poultry to provide for their local
families, but also sell the birds or eggs for a profit. When a chicken
is properly cared for, they produce more eggs and meat, making them the
most economic protein source for African small holder farmers and their
families. I've learned from so many of the women and men that I've
worked with in Africa. I've learned how much poultry has been a part of
their culture as it is in our company culture.
My most cherished memory of my volunteer effort in Africa was
teaching a little girl named Agape and her family how to care for their
chickens. Agape, full of life, was so excited to hold a baby chicken
that would ultimately provide food security for her family. The image
of her smile and little hands holding that day-old layer chicken and
how I was able to partner with her family's future will never escape my
memory.
I was led to share my book of knowledge with communities in Africa
to show them how to raise and care for chickens, to empower them to
have a sustainable source of protein and to provide income for their
families. Back home in North America, I continue to share that same
book in my daily life to help people care for poultry and to provide
for their families on commercial broiler and breeder farms. Agape,
abounding love of a little girl to care for animals to care for her
family. Agape, to give to others the precious gift of knowledge.
What's Next?
We are proud of our industry's sustainability efforts,and proud to
have shared this first U.S. broiler chickenindustry sustainability
report with you.
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This is an important
step in our collective
journey as an industry.
Our efforts will
continue, as they must,
to support our planet
and society for the
decades to come.
Looking ahead, we are
focused on sustainable
development and the
critical role of food
systems that include
our chicken industry.
We recognize the
importance of
continuing progress on
the SDGs through the
work of our members and
through partnerships
with other
organizations to
leverage our collective
strengths.
We look forward to
the US-RSPE's release
of the first-ever
multi-stakeholder
reporting framework for
the full U.S. supply
chains for chicken,
turkey, and eggs. The
new framework will
become a valuable tool
to guide our members on
their sustainability
strategies and
reporting. We will
encourage members to
use the framework to
measure their
sustainability impacts
and make meaningful
disclosures--whether
they are beginning
their sustainability
journeys or already
have mature programs.
Opportunities
revealed by the
described Broiler
Production System Life
Cycle Assessment: 2020
Update also set the
groundwork for next
steps for the chicken
industry. Based on the
data, we know that all
five key sustainability
intensity metrics
improved significantly
in the past de-
cade. We also know that additional improvements are possible going
forward.
The research revealed that our continued areas of greatest impact
and improvement will come from factors affecting feed consumption and
feed conversion ratio. Therefore, further innovations in genetics, feed
additives and supplements should be seen as part of our next
sustainability frontier.
The future of our planet, people and communities depends on
us doing our part, and we are committed.
Also based on the 2020 LCA, we learned that external factors
associated with increasing crop production, improving fuel efficiency,
and increasing adoption of renewable energy sources should become an
integral part of our extended purview.
Finally, we are mindful of regional differences that affect the
opportunities for achieving sustainability progress. Knowing that one-
size-does-not-fit-all regarding geography, we will consider regional
differences when we advance new solutions. This is true for NCC as well
as for our members.
Individual NCC members might use learnings from the 2020 LCA as the
starting point for their own footprint assessments, to help them
identify organization-specific opportunities for continuous
improvement, as will US-RSPE's sustainability framework.
Our chicken industry will continue to innovate as responsible
stewards to advance sustainability while feeding the world.
Exhibit 2: NCC Comments to Docket No. AMS-FTPP-21-0044 Transparency in
Poultry Grower Contracting and Tournaments (Aug. 23, 2022)
August 23, 2022
Submitted electronically via regulations.gov
Bruce Summers,
Administrator,
Agricultural Marketing Service,
United States Department of Agriculture
Docket Clerk,
Agricultural Marketing Service,
U.S. Department of Agriculture,
Washington, DC
Re: Docket No. AMS-FTPP-21-0044, Transparency in Poultry Grower
Contracting and Tournaments
Dear Mr. Summers:
The National Chicken Council (NCC) appreciates the opportunity to
provide comments on the United States Department of Agriculture (USDA)
Agricultural Marketing Service (AMS) proposed rule ``Transparency in
Poultry Grower Contracting and Tournaments'' (Proposed Rule).\1\ NCC is
the national, nonprofit trade association that represents vertically
integrated companies that produce and process more than 95 percent of
the chicken marketed in the United States. NCC members would be
directly affected by the Proposed Rule.
---------------------------------------------------------------------------
\1\ 87 Fed. Reg. 34980 (June 8, 2022), https://www.govinfo.gov/
content/pkg/FR-2022-06-08/pdf/2022-11997.pdf.
---------------------------------------------------------------------------
As explained in more detail in these comments, NCC is deeply
concerned that the Proposed Rule would have a devastating financial
impact on the U.S. chicken industry by raising costs and administrative
burdens, contributing to increased food prices for consumers, and
ultimately destabilizing a successful compensation system. This would
lead to negative ancillary impacts on other related sectors through
less efficient use of inputs and resources used for producing poultry
such as feed and energy. NCC opposes the Proposed Rule. We urge AMS to
withdraw it and refrain from further steps that would undermine a
successful compensation system. If AMS were to nonetheless proceed with
this rulemaking, we have identified several issues for further
consideration.
These comments begin with an Executive Summary (Part I), followed
by a brief description of the benefits of the poultry grower
compensation system (Part II), fundamental concerns with the Proposed
Rule (Parts III and IV), and comments on specific aspects of the
Proposed Rule (Part V).
I. Executive Summary
NCC opposes the Proposed Rule and urges AMS to withdraw it in its
entirety. The current poultry grower compensation system has long
worked well to fairly and appropriately reward high-performing growers
and drive efficient use of resources. The proposal would undermine the
efficiency and global competitiveness of the U.S. broiler industry by
imposing needless costs and rigid mandates with no quantifiable benefit
but with clear negative impacts. This will ultimately inject costs and
inefficiencies into the supply chain at a time when inflation and
access to affordable food are key concerns to the American public.
Further, the proposal contradicts the clear intent of Congress, is well
beyond AMS's mandate under the Packers and Stockyards Act (PSA), and is
arbitrary and capricious under the Administrative Procedure Act (APA).
If AMS moves forward with this rulemaking despite these concerns,
NCC has identified several issues requiring further consideration,
including the following:
Assess the true cost of the Proposed Rule: AMS's cost
assessment overlooks numerous key costs industry would shoulder
to comply with the Proposed Rule and significantly
underestimates the actual costs of the proposal, including the
Proposed Rule's potential effects on inflation.
Address all PSA amendments in a single rulemaking: AMS has
positioned the Proposed Rule as part of a broader set of
planned changes to AMS's PSA regulation. AMS should address all
amendments to PSA regulations in a single rulemaking and avoid
a piecemeal approach that imposes shifting requirements and
hidden costs over several years.
Limit scope of disclosures: AMS should limit the scope of
the proposed required disclosures to only information that
would actually affect grower compensation expectations and omit
all information that is publicly available or unrelated to
compensation. Several of the proposed disclosures are unhelpful
and introduce unnecessary complexity into an already highly
regulated process.
Omit the proposed governance framework and certification:
AMS should omit the proposed governance framework and
certification in its entirety as this proposal is an incredibly
costly measure that does not provide useful information and
does not address a real concern.
Eliminate the required disclosure of forward-looking
projections: All forward-looking projections should be omitted
from a final rule, as they by definition cannot be accurate and
risk causing significant confusion.
Eliminate the requirement that minimum annual placements and
minimum stocking densities be included in contracts: The
proposal's requirement that contracts specify minimum annual
placements and minimum stocking densities goes well beyond mere
disclosure, imposes terms on private contracts, and would
wrongfully impede the ability to adjust to market dynamics.
In addition to these points, we have identified several other
aspects of the Proposed Rule that are vague, unnecessary, unworkable,
or would otherwise require clarification.
II. The Current Poultry Grower Contracting System Is a Well-Designed,
Efficient Structure That Benefits Growers, Dealers, and
Consumers
NCC supports the current poultry grower compensation system because
it rewards family farmers for their hard work efficiently raising high-
quality birds. The current system's fair, honest contracts provide a
target pay that high-performing growers can supplement with the
efficient use of resources necessary to produce poultry. This system
promotes superior results that lower the cost of raising chickens for
the benefit of growers, live poultry dealers (``dealers''), and
consumers.
The system also efficiently allocates economic risk to the parties
best prepared to burden it--dealers supply growers with broiler
chickens, feed, veterinary care, technical advice, and other resources,
alleviating most of the economic risk from their contract growers as
compared to independent growers. Meanwhile, contract growers provide
high-quality, day-to-day care, land, and housing for their birds. This
mutually beneficial partnership supports the economic viability and
independence of family farms by averting risk and promoting stable and
predictable income.
Indeed, a March 2022 study conducted by Dr. Tom Elam (the ``Elam
Study,'' attached as Appendix A) found widespread benefits and support
for this model as mutually beneficial, successful, and profitable.\2\
USDA's own data shows that over the last decade, poultry growers on
average earned more than the average farm income.\3\ Average grower
payments per square foot and payments per pound have increased steadily
over the past thirty years, and raising broilers generated more than
$3.6 billion in payments to growers in 2020 (in 2012 dollars), income
that sustains rural communities and gets reinvested back into American
agriculture.\4\ Revealingly, the Elam Study shows that even with the
onslaught of the COVID-19 pandemic, lockdowns, and unprecedented
economic disruption, growers earned more in payments from dealers than
in any prior year, reflecting the value of the current grower
compensation model. Had growers owned their own birds, they would have
faced devastating market conditions and met financial ruin. Instead,
under the current system, they thrived.
---------------------------------------------------------------------------
\2\ T. Elam, Live Chicken Production Trends, FarmEcon, LLC (Mar.
2022), https://www.nationalchickencouncil.org/wp-content/uploads/2022/
03/Live-Chicken-Production-FARM
ECON-LLC-2022-revision-FINAL.pdf [hereinafter ``Elam Study''].
\3\ Id. at 10 (citing USDA, Agricultural Resource Management
Survey, https://my.data.ers.usda.gov/arms/tailored-reports).
\4\ Id. at 7. Notably, this figure encompasses payments from
integrators to growers. It does not encompass other payments such as
COVID-19 relief payments.
---------------------------------------------------------------------------
The American poultry industry is the most competitive in the world
in significant part because the poultry grower compensation system
encourages innovation and investment in the best equipment and
practices. NCC is proud to represent an industry that consistently and
continuously produces affordable protein, even in times of soaring
across-the-board inflation and economic distress that increase prices
for consumers.
The competitive nature of this industry and existing requirements
incentivize and ensure poultry processors operate fairly and justly.
Most growers are in a position to choose between partnering with two or
more processors and can readily cut ties with a bad business partner.
Over 50% of growers have been with their current dealer for 10 years or
more, a statistic unchanged from 2015, with an additional 20% having
been with their current dealer for over 5 years.\5\ Given that the
majority of poultry growing contracts during the study were for 5 years
or less, and \1/3\ were flock-to-flock arrangements, these statistics
show that growers find their relationships with dealers beneficial and
willingly continue doing business after their initial contracts end.
Moreover, chicken processing plants are expensive and only provide
sufficient return on investment if they operate at full capacity.
Processors that gain a reputation as bad business partners, including
by attempts to manipulate a grower's performance or otherwise drive
away growers, would quickly see their plants under-supplied and their
grower pool taken by competitors. Notably, AMS cites no evidence of
actual unfair dealings to support this proposal.
---------------------------------------------------------------------------
\5\ Id. at 3.
---------------------------------------------------------------------------
III. AMS's Proposal Exceeds Its Statutory Authority, Contradicts
Congressional Direction, and Is Arbitrary and Capricious
A. The Proposed Rule exceeds AMS's statutory authority under the PSA
AMS grounds the Proposed Rule in Section 202(a) of the PSA, which
makes it a violation for any live poultry dealer to ``[e]ngage in or
use any unfair, unjustly discriminatory, or deceptive practice or
device.'' \6\ However, AMS fundamentally fails to identify how plainly
written poultry growing arrangements are unfair, unjustly
discriminatory, or deceptive. Indeed, they are not.
---------------------------------------------------------------------------
\6\ 7 U.S.C. 192(a). AMS also cites PSA Section 410(a)'s full-
payment provisions, but nowhere does AMS allege that dealers do not pay
growers as called for under their contracts, nor would the Proposed
Rule do anything to address actual payments; the stated aim of the
Proposed Rule is to provide more information.
---------------------------------------------------------------------------
Instead, AMS attempts to justify the Proposed Rule by arguing that
poultry growing arrangements are ``incomplete contracts,'' by pointing
to information asymmetries, and by revisiting well-worn allusions to
vaguely described grievances made by unidentified growers. As explained
below, we question the sufficiency of these statements to support the
rulemaking record to begin with. Even if these statements were true,
however, they do not establish that Section 202(a) of the PSA
authorizes AMS to mandate onerous disclosures as part of the
contracting process. First, to the extent that AMS is concerned that
some conditions affecting compensation may not be encompassed in the
contract, that is common in many entirely lawful business arrangements.
A supply agreement might not have minimum volume requirements, an
author's publisher agreement does not specify how many books will be
sold, an accountant's engagement letter might not specify how many of
hours of work the client will request, and a farmer renting a stall at
a farmers['] market has no guaranteed buyers. None of those situations
are unfair or deceptive practices, and indeed, the Federal Trade
Commission has not prohibited them despite also having authority to
address deceptive practices in other sectors. Moreover, unlike all of
these examples, a dealer has an economic interest in keeping growers'
farms in steady operation, as dealers also invest costs into the
dealer-grower relationship and have every incentive to keep their
growers in production.
Second, all markets have information asymmetry; perfect information
symmetry exists only in economics textbooks. The fact that dealers may
possess information about their businesses not known to growers and
that growers may possess information not known to dealers does not in
any way mean that dealings between the parties are unfair or involve
deceptive practices. Tellingly, most, or all, of AMS's proposed
disclosures in no way affect how a grower's settlement will actually be
calculated. Settlement calculations are defined through contracts, and
growers are provided at settlement all the information necessary to
determine how the payment was determined. Growers also have ample
opportunity to understand the market before entering into an agreement,
including by consulting lenders, financial advisors, agriculture
extension offices, and their community members. Further, other remedies
are available in the exceedingly unlikely event that a dealer would
actually fraudulently induce a grower to sign a contract. AMS has not
established that the mere existence of a potential information
asymmetry requires the proposed disclosures to remedy unfair or
deceptive practices. Section 202(a) requires that parties not engage in
unfair or deceptive practices; it does not require that all parties
have the exact same information.
Finally, to support its position that widespread Section 202(a)
violations would occur without the proposed disclosures, AMS provides
only vague references to complaints by growers. AMS provides no details
about these purported complaints, including what specifically they
alleged happened, when they were lodged, whether they were
substantiated, or even how many AMS has received. The long history of
rulemaking on this topic has been peppered with allusions to thinly
described complaints, but never has AMS provided any real detail. Even
more tellingly, no court has ruled that the current grower compensation
system violates Section 202(a), nor has AMS taken enforcement action on
this basis despite decades of use. In short, AMS has failed to
establish that the Proposed Rule is necessary to prevent PSA Section
202(a) violations.
B. The Proposed Rule Is Contrary to Congressional Purpose
More than a decade of clear Congressional direction reinforces that
AMS lacks authority under the PSA to conduct this rulemaking. USDA has
a long history of overseeing the PSA through established regulations
and within the guardrails established by extensive Federal appellate
case law about the scope of PSA Section 202. The PSA has been law for
more than 100 years, and Congress has amended it as needed over the
years when it determined additional authorities or requirements were
needed.
Congress also addresses PSA issues periodically through farm bills
and the appropriations process. Congress most recently addressed PSA
issues through the 2008 Farm Bill and subsequent appropriations bills.
In the 2008 Farm Bill, Congress directed USDA to identify the criteria
that would be used to evaluate whether four different types of conduct
violated the PSA.\7\ In 2008, the broiler industry was using more or
less the same style of grower compensation system as is being used
today. Notably, although Congress directed USDA to address several
topics, the 2008 Farm Bill did not direct USDA to take any actions
related to poultry grower compensation or the so-called tournament
system. When USDA responded with a wide-ranging proposed rule that
addressed poultry grower ranking systems, among other topics, in great
detail, Congress used its appropriations powers to prevent USDA from
finalizing and implementing the rulemaking for several years.\8\ When
the appropriations restriction eventually lapsed, USDA never further
pursued rulemaking to address poultry grower compensation.
---------------------------------------------------------------------------
\7\ H.R. 6124, 110th Cong. 1106 (2008).
\8\ Consolidated and Further Continuing Appropriations Act, 2015,
H.R. 83, 113th Cong. 731 (2014); Consolidated Appropriations Act,
2014, H.R. 3547, 113th Cong. 744 (2014); Consolidated and Further
Continuing Appropriations Act, 2013, H.R. 933, 113th Cong. 742-43
(2013); Consolidated and Further Continuing Appropriations Act, 2012,
H.R. 2112, 112th Cong. 721 (2011).
---------------------------------------------------------------------------
This history demonstrates exceedingly clear Congressional direction
about the nature of topics appropriate for USDA rulemaking under the
PSA. Through the 2008 Farm Bill, Congress provided USDA with clear
direction to address topics that Congress determined needed additional
regulations. Congress was undoubtedly well aware of the types of
poultry grower compensation systems being used, as those systems had
been in place for many years. Nonetheless, Congress specifically did
not direct any action with respect to poultry growing arrangements.
This directly reflects Congress's view that the prevailing regulatory
framework for poultry growing arrangements be maintained. If that were
not direction enough, when USDA attempted nonetheless to change the
prevailing regulatory structure, Congress promptly stepped in and used
its appropriations authority to halt further rulemaking on poultry
grower compensation systems, maintaining that prohibition for years.
Moreover, Congress did not intervene when USDA stopped pursuing and
eventually withdrew the proposed rule on poultry grower compensation
systems.
Taken together, this sequence of events clearly shows how, over
more than a decade, Congress expressed its consistent view that the
then-existing approach toward poultry grower compensation systems was
the desired one and that USDA was overstepping by trying to change the
system. Despite the current poultry grower compensation system being in
use for decades, no Federal court has held that the system violates
Sections 202(a) of the PSA, further reinforcing that the current
regulatory approach, not the proposed one, is the one intended by
Congress.
Given this clear direction from Congress, whether to take any steps
to change the current poultry grower compensation system is a major
question requiring Congressional direction. As such, AMS may not expand
its regulatory framework to change or undermine the currently used
system. As recently stated by the Supreme Court in West Virginia v.
EPA, in certain cases of ``economic and political significance,'' an
agency must demonstrate ``clear Congressional authorization'' to
exercise its powers.\9\ As evidenced by the amount of public attention
devoted to chicken industry contracting and attention from the highest
levels of USDA and the White House, chicken grower contracting has
taken on ``political significance.'' It is also of great economic
significance, as it drives billions of dollars in revenue to growers
and forms the foundation for the U.S. broiler industry, benefiting
growers, processors, and consumers. Not only does AMS lack the
necessary ``clear Congressional authorization'' to advance rulemaking
into this topic, Congress has also already voiced its support for the
current system and its objection to USDA efforts to further regulate
the existing poultry grower compensation system.
---------------------------------------------------------------------------
\9\ 142 S. Ct. 2587, 2613-14 (2022).
---------------------------------------------------------------------------
C. The Proposed Rule Is Based on a Flawed Administrative Record and
Thus Is Arbitrary and Capricious
The Proposed Rule is based on a flawed administrative record that
reflects a fundamental misunderstanding of poultry contracting
supported only by unsubstantiated hearsay. This flawed administrative
record renders the Proposed Rule arbitrary and capricious under the
APA.\10\
---------------------------------------------------------------------------
\10\ 5 U.S.C. 706(2)(A).
---------------------------------------------------------------------------
The Proposed Rule is fundamentally unnecessary for the efficient
operation of the chicken raising market. AMS justifies the Proposed
Rule as being necessary to address the perceived ``gap between expected
earnings and the ability to actually achieve those outcomes through
reasonable efforts by the grower'' by ``increas[ing] transparency in
all poultry growing contracting.'' \11\ In fact, the chicken grow out
market has long operated efficiently without these government-mandated
disclosures, and most of the proposed disclosures would not provide any
meaningful information about what income a grower might anticipate from
a contract that is not already provided due to private market dynamics.
---------------------------------------------------------------------------
\11\ 87 Fed. Reg. at 34980.
---------------------------------------------------------------------------
Broiler processors have long used various permutations of
competitive grower compensation systems to drive efficiency in
production. In many ways, this is no different than any arrangement
between a business and a service provider, in which service providers
compete with others to provide the highest quality services as
efficiently as possible and buyers of those services compete with each
other to secure the best providers at favorable prices. This process
has resulted in a highly efficient market and is an important driver of
the global cost-competitiveness of U.S. chicken meat. Chicken meat has
never been more affordable in the U.S. on a real-dollar basis or when
viewed against a typical household's overall buying power, even
considering the immense inflationary pressures facing consumers and
businesses from all directions. AMS fails to explain why these broadly
recognized economic principles do not apply in the poultry growing
market. In fact, AMS has previously conceded that the economic
literature on the industry supports a finding of no anticompetitive
market power effects, which one would expect to see before intervening
in a market.\12\
---------------------------------------------------------------------------
\12\ See Unfair Practices and Undue Preferences in Violation of the
Packers and Stockyards Act, 81 Fed. Reg. 92711 (Dec. 20, 2016) (noting
that in a review of thirty-three studies published since 1990 relevant
for assessing the effect of concentration on commodity or food prices
in agricultural sectors, a majority of the studies ``found no evidence
of market power, or found that the efficiency gains from concentration
were larger than the market power effects'').
---------------------------------------------------------------------------
The chicken growing contracting process is highly efficient and is
also mutually beneficial for both parties. If it were not, contracts
would not be extended through mutual agreement, entrepreneurs would not
continue to enter the poultry raising business, and growers would shift
away from poultry production to other substitute agricultural land
uses. Instead, contracts are regularly renewed (even flock-to-flock
arrangements), farmers willingly invest in improving their farming
operations, and a thousands-strong waiting list of farmers seeking to
enter the chicken raising business or expand their farms to raise even
more birds, willingly investing to improve farming operations.\13\
Although NCC understands AMS is aware of at least one study
demonstrating growers' interest in renewing their agreements (the Elam
Study discussed elsewhere in these comments), AMS fails to address this
in its proposal.
---------------------------------------------------------------------------
\13\ See Elam Study at 3, 4, 11, 12.
---------------------------------------------------------------------------
Further, AMS's characterization of growers as being
unsophisticated, financially uninformed neophytes who are unable to
understand contracts and make informed business decisions does a great
disservice to rural America. The history of PSA rulemaking over the
past twelve years has been rife with vague suggestions and insinuations
that growers are in some manner misled or mistreated during the
contracting process. But at no point in numerous rulemakings over more
than a decade has AMS actually identified specific instances that would
constitute a PSA violation or even concretely demonstrated that the
perceived harm is real and widespread at a level justifying costly and
invasive regulations that will harm industry participants, including
growers and consumers. Nor has AMS obtained court rulings that find the
vaguely alluded-to conduct violates the PSA. Instead, AMS would base
this rulemaking on conjecture and vague allusions to unsubstantiated
complaints, many of which likely date back to a listening session more
than a decade ago.
In fact, chicken growers are savvy small business owners, many of
whom have decades of farming experience and are part of multi-
generation farming families. They understand the business and enjoy
average incomes that exceed that of the typical American farmer.\14\ At
the same time, chicken growers know they do not have 9 to 5 jobs in
air-conditioned offices. They choose to enter and stay in the business
because they are committed to farming, and those who value hard work
and innovation see their efforts rewarded. They understand how to read
their contracts, project income under various scenarios, and maximize
their income by raising birds as efficiently as possible.
---------------------------------------------------------------------------
\14\ Id. at 10.
---------------------------------------------------------------------------
Moreover, like most businesses in the country, many chicken farmers
rely on loans to finance parts of their operations. This market
attribute provides additional protection for farmers that displaces
AMS's theoretical concerns. The banks that specialize in agricultural
lending to chicken growers have an extremely sophisticated
understanding of the chicken industry, and they are able to make
informed decisions about a farmer's creditworthiness and likely income
based on a farmer's experience with the industry and the contents of
existing contracts. If a lender does not believe a particular contract
would provide adequate income for a chicken grower to meet his or her
loan obligations, the lender is unlikely to issue the loan. This aspect
of the private market provides an incentive for the dealer to ensure
that the chicken grower has the information necessary for the grower
and lender to evaluate the contract, as the dealer has an interest in a
grower being able to secure necessary financing on favorable terms.
Importantly, this happens through efficient market dynamics and in the
absence of costly and prescriptive regulations. And just as
importantly, it works. For example, the Elam Study found that the
deficiency percent and charge-off percent for poultry grower loans
amount to merely \1/3\ of the average agricultural loan, based on Small
Business Administration loan quality data.\15\ The data overwhelmingly
show that growers and their lenders are able to effectively and
accurately evaluate expected income from poultry growing arrangements
without the burdensome and largely uninformative disclosures called for
in the Proposed Rule. AMS entirely overlooks the role that lenders play
in helping to structure the poultry raising market, despite the fact
that agricultural loans are administered by a sister agency, yet again
underscoring the arbitrary and capricious nature of this rulemaking and
lack of an adequate administrative record.
---------------------------------------------------------------------------
\15\ Id. at 11.
---------------------------------------------------------------------------
Under current practices, growers are provided contracts that
clearly set forth how their payments are determined. With this
information, a grower can review the contract, assess his or her
ability to perform as well as or better than his or her competitors,
and make an informed decision as to whether to enter the chicken
raising business. Other American small business owners make critical
business decisions with much less information. Moreover, at settlement,
dealers provide the information necessary for growers to understand
their payment under the contract, and growers with concerns about
payments can raise those concerns directly with the dealer or pursue
numerous other avenues for relief.
Importantly, none of the factors identified in the proposed
disclosures meaningfully impact grower payments over the length of a
typical growing arrangement. Dealers provide growers with inputs from a
common supply in an essentially random manner (with the obvious
exception of growers supplied with specific types of birds or specific
feeds to meet various specifications, which would already be separately
addressed). While inputs may naturally vary due to the practical
reality that the industry involves live animals, such as slight
variations in feed supply or in breeder flock age, any natural
discrepancy would naturally dissipate over the life of a typical
growing arrangement, and any such variation is statistically
insignificant over time. Providing precise inputs while accounting for
minor flock-by-flock variations would rigidly impose extremely
complicated systems on dealers that would certainly increase costs on
the sector and that would not result in greater overall grower
compensation or more efficient results. In fact, a grower would be
disappointed to see his or her payment adversely adjusted because of a
minor variation in a dealer input, when in reality his or her excellent
care and hard work was the actual reason the flock performed well.
Fundamentally, the grower's skill and expertise in managing the
birds and deploying the grower's resources drives grower payments under
broiler production contracts. The proposed disclosures entirely fail to
acknowledge this premise. In contrast, under the current system, a
grower's skills and efficiency are reflected in settlement payments.
The information covered in the proposed disclosures is ancillary at
best and, in many cases, immaterial to grower payments. Requiring
complicated disclosures as contemplated in the Proposed Rule will not
improve a grower's ability to project income. AMS again glosses over
the disconnect between the broad and burdensome disclosures and how
settlement payments are actually determined under the parties' agreed-
upon terms. There must be a ``rational connection'' between a
regulation and the issue it is trying to address, but the clear
disconnect between the disclosures and how payments are actually
determined means that standard is not met.\16\
---------------------------------------------------------------------------
\16\ Motor Vehicle Mfrs. Ass'n v. State Farm Mutual Auto Ins. Co.,
463 U.S. 29, 43 (1983).
---------------------------------------------------------------------------
Further, the proposed governance and certification framework is
entirely unnecessary, does not achieve the Proposed Rule's objectives,
is well outside the scope of the basis for the rulemaking, and, as
discussed further below, would impose exorbitant compliance costs on
the chicken supply chain with no benefit. Even if the disclosures
called for under the Proposed Rule helped growers better project their
income under contracts, AMS has not identified any compelling reason to
suggest the information provided would be inaccurate or would otherwise
require the proposed complex auditing and oversight scheme seemingly
inspired by public financial reporting for publicly listed companies.
Companies have been required to maintain various documents showing
compliance with the PSA for decades and have successfully met those
requirements without cumbersome and costly auditing and certification
functions. There is no evidence that such a function would improve the
reliability of disclosed information. However, these functions would be
needlessly costly to the detriment of growers, dealers, and consumers.
Including this provision is likewise arbitrary and capricious.
Moreover, proposed 201.100(f)(1)(ii) would apparently have the
proposed governance framework apply not only to the proposed
disclosures but also to all of PSA compliance. PSA compliance beyond
disclosures falls well outside the scope of this rulemaking. If
additional compliance is considered at all, it should be addressed in a
separate rulemaking appropriately focused on those issues. Many aspects
of PSA compliance are not conducive to auditing systems, and nothing
indicates that such a system would materially improve PSA compliance.
Finally, as written, the proposed governance framework would apparently
apply only to live poultry dealers, which would create troubling
inconsistencies in how companies marketing different species would have
to demonstrate compliance with the PSA.
AMS's rationale for the proposed governance framework suffers an
even more egregious and alarming flaw in the record. As justification
for the need for the burdensome governance framework, AMS points to
``current civil and criminal actions'' against various individuals or
companies alleging certain antitrust violations, citing to a press
release indicating that the Department of Justice had brought charges
against certain individuals.\17\ It is entirely inappropriate for an
agency to point to ongoing criminal or civil litigation to justify
rulemaking of any kind. The mere filing of a civil complaint or
criminal charges in no way indicates the alleged events actually
occurred or that the individuals or companies are liable for or guilty
of the conduct. Defendants are presumed innocent unless proven guilty,
and an agency should never use unproven charges as the basis of a
rulemaking or use the rulemaking process to influence public view of a
case. Otherwise, there would be nothing stopping the government from
bringing charges or filing complaints solely to manufacture an
administrative record. Underscoring this point, the Department of
Justice has dropped charges against several of the defendants in the
case that AMS references as justifying the governance framework. This
stated rationale deeply reinforces the arbitrary and capricious nature
of the rulemaking.
---------------------------------------------------------------------------
\17\ See 87 Fed. Reg. at 34996.
---------------------------------------------------------------------------
Lastly, it has come to NCC's attention that officials at USDA or
the Department of Justice may have on its own accord contacted growers
about submitting comments to this rulemaking, and that it is possible
these communications may have had the intent or effect of dissuading
growers from submitting comments not in support of the Proposed Rule.
NCC and our members place great weight on all Americans' First
Amendment rights to speak their opinions freely, as well as on the
freedom of all stakeholders to freely share their views on proposed
regulatory action (or to refrain from doing so), to do so anonymously
if they so desire, and above all, to do so without coercion or
influence by the regulatory agency conducting the rulemaking. To the
extent USDA or the Department of Justice has contacted growers or any
other stakeholders in a manner that presents even the possibility of
influencing the nature of comments that may be received, such action
would irreparably poison the administrative record, and AMS would need
to withdraw the rulemaking in its entirety.
For all these reasons, as well as the specific infirmities
discussed further below with respect to specific proposed provisions,
the proposal is arbitrary and capricious and should be withdrawn.
IV. AMS Has Significantly Underestimated the Costs of Complying with
This Regulation
AMS has significantly underestimated the costs of the Proposed Rule
and failed to consider other adverse consequences of these regulations,
including the risk of increased frivolous litigation, industry-wide
efficiency losses, costs to farmers and consumers, and the effects on
inflation.
AMS predicts the 10 year aggregate combined costs to dealers and
poultry growers under the Proposed Rule to be $20,492,160. AMS
estimates that $9,039,442 of these costs will be carried by dealers and
that an even greater amount--$11,452,718--will fall on poultry growers.
These costs alone would affect the bottom line of growers and dealers
with no clear benefit. Moreover, these exorbitant costs will burden
food supply chains across the country in a time when severe inflation
has raised the cost of food to record levels. Further, we fail to see
how AMS can credibly claim this rule benefits growers when more of its
financial burden is placed on the shoulders of those who it purports to
protect and when AMS all but concedes the Proposed Rule will not
actually increase overall grower pay.
AMS has underestimated the hourly rates, number of people involved,
and time required of executives, compliance officers, regulatory
consultants, attorneys, and other services required to implement the
Proposed Rule. For example, to implement the proposed governance
framework, dealers would need to procure new data management systems
and potentially custom software and substantially expand their
compliance departments to collect, maintain, organize, and verify the
information. Establishing compliance programs requires highly
compensated skilled professionals, and smaller dealers may suffer the
most due to their lack of scale to better absorb these costs. Because
the Proposed Rule would require contracts be amended directly, dealers
would incur extensive costs studying and evaluating necessary
modifications, renegotiating thousands of contracts, and implementing
each individual change. Similarly, growers would incur legal and
advisory costs as they work to understand any changes and decide
whether to accept them. The proposed disclosures would almost certainly
generate frivolous litigation, and the proposed requirement to disclose
prior and ongoing litigation could deter settlements, further
increasing legal fees for growers and dealers as cases that would have
otherwise settled drag out and cases that should never have been filed
have to be litigated. AMS does not adequately consider any of these
costs in the Proposed Rule.
Moreover, AMS entirely fails to consider the negative effects of
the proposed disclosures on growers, especially high-performing
growers. AMS apparently contemplates that dealers might adjust payment
based on various factors. AMS's presumption is entirely misplaced. If a
dealer were to increase pay for lower-performing growers, that money
would have to come from somewhere, and it might have to be offset by
decreasing the income of high-performing growers who are accustomed to
being rewarded for their hard work. This would lead to payment
compression and fewer incentives and rewards for the best performers.
It would also harm the highest-performing growers, especially those
with excellent track records who have invested in their farming
operations based on an understanding that their high performance will
continually be rewarded.
Removing incentives for high performance would trigger a vicious
cycle of efficiency and productivity losses as growers who are no
longer rewarded for high performance have fewer incentives to perform
highly. This would compromise the overall global competitiveness and
the resources of the U.S. chicken industry, shrinking the pool of
revenue available to growers and driving up costs while also further
squandering our already limited resources during a period of already
historic inflation. Dismantling the current structure, which rewards
higher performance, will disincentivize growers from making their
operations more efficient and risks raising the cost of production,
ultimately harming consumers, integrators, and growers alike. The
American chicken industry is extremely competitive worldwide, due in
large part to efficiencies and innovation driven by the current system.
Under the proposal, AMS risks increasing costs, reducing efficiencies,
and stifling innovation, which could make the American chicken industry
less competitive against growing international competition to the
detriment of American agriculture as a whole.
Finally, AMS fails to consider the negative consequences of
injecting needless and extensive production costs into the broiler
supply chain in the midst of the highest inflationary period in forty
years. Chicken has earned its place on the table through a relentless
focus on efficiency at all steps of production, making it America's
number one, and most affordable, animal protein. However, supply chain
disruptions, loose fiscal and monetary policy, labor shortages, rising
feed costs, lingering effects of the coronavirus pandemic, and
geopolitical events have all placed immense cost pressures on the
supply chain. AMS's reckless injection of additional costs into the
supply chain will hurt everyone who touches chicken-growers, dealers,
and consumers. As an affordable and nutritious food, chicken is an
especially important protein source for food insecure individuals and
those who participate in USDA's nutrition assistance programs. AMS has
failed to consider the negative consequences to society of increased
production costs and especially the consequences to the nation's most
vulnerable individuals who may find themselves able to afford less
chicken. AMS's cost estimates are likely low by orders of magnitude.
Worse, AMS proposes to impose these costs without identifying any
real quantifiable benefit. AMS can only point to a highly theoretical
explanation that ``a risk averse producer will benefit economically
from a reduction in revenue risk.'' \18\ In short, AMS concedes that
growers will not actually earn more income overall under the proposal
and alleges only that the costs of the rule may make it somewhat easier
for growers to predict how much income they might earn. AMS tries to
assign a theoretical dollar value to this benefit by hypothesizing the
value of reduced uncertainty around revenue for individuals with
theoretical amounts of risk aversion, conjuring a wide range of
potential 1 year and 10 year discounted values based on possible
variations in net revenue. These figures range from about $1.5 million
at the low end of the 1 year range to $305 million at the high end of
the discounted 10 year range. In other words, AMS believes that growers
might benefit from the assumption that they would have a better idea of
how much money a contract might bring and further attempts to assign an
economic value to having that certainty. Critically, AMS does not
propose that a grower would actually make more money, just that the
grower might have a better idea of how much money he or she would make
(in fact, the added costs would likely decrease overall grower pay in
the aggregate). This attempt to quantify benefits strains credulity and
belies the lack of any real benefit to justify the costs of this
proposal. Put differently, under one scenario, AMS's analysis says it
is worth $305 million to growers over 10 years to be able to better
predict how much income they will make under their contracts (again,
not to actually make more money under the contracts, just to know with
greater certainty how much they will make). This would mean that
rational growers collectively should be willing to pay up to $305
million dollars right now to receive the income clarity the Proposed
Rule would supposedly bring. Of course, no grower would actually make
such an offer, reinforcing that AMS's attempt to quantify the benefits
constitutes hand-waving at best.
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\18\ 87 Fed. Reg. at 35008.
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At bottom, AMS is proposing to inject tens of millions of dollars
of compliance costs into the chicken supply chain with no actual
benefits. At a minimum, AMS must conduct a properly comprehensive cost-
benefit analysis that better reflects the exorbitant costs of this
Proposed Rule and compares those against any real, quantifiable
benefits. AMS should withdraw the proposal entirely.
V. Comments on Proposed Regulations
Although NCC strongly urges AMS to withdraw the Proposed Rule for
the reasons explained above, if AMS moves forward with the rulemaking,
we urge it to revise the proposal to reduce the costs imposed on
stakeholders and better focus the rule on AMS's goal of providing
useful, essential information to growers. In particular, we highlight
the following considerations.
A. AMS Should Limit the Scope of the Proposed Regulations and Ensure
the Timing of These Disclosures Reflects Business Realities
1. Scope of Information Subject to Disclosure
AMS states the goal of the Proposed Rule is to provide growers with
information that USDA believes will help growers anticipate income
under poultry grower contracts. To achieve its goal, AMS should focus
only on those disclosures that might inform grower incomes. To this
end, NCC recommends AMS omit from the required disclosures the
following items that are irrelevant for determining how much income a
grower may earn: dealer's bankruptcy history, litigation history,
general rights and obligations under the PSA, payment information for
different regions, and breeder flock information.
The scope of these data would result in extremely lengthy,
burdensome disclosures, especially for large dealers, that will not be
helpful for growers and will only introduce confusion and complexity
into contracting. Omitting the requirements listed above would reduce
the costs of the rule and the administrative burden on dealers.
Similarly, its omission would help reduce confusion over the
disclosures provided and focus growers' attention on information that
might be indicative of income.
Likewise, AMS should not place on dealers the administrative burden
of collecting publicly available information. For information like
bankruptcy proceedings, anyone, including growers, can easily obtain
that information at their own initiative. Similarly, growers, not
dealers, are in the best position to understand a grower's variable
costs. In addition, AMS should not include in its required disclosures
any item that would be included in the poultry grower contract
arrangement.
Further, AMS must ensure that competitively sensitive information
is protected. Some of the information that would be disclosed under the
Proposed Rule may be competitively sensitive information. For example,
grower payments may provide information about the company's costs and
live side operations. Breeder information, such as strategic changes in
breed or efforts to deal with chick health, might be proprietary,
especially if a third-party breeder is used. Details about feed outages
or other internal operations might reveal proprietary information that
would adversely and unfairly negatively impact a company's competitive
position. To the extent that any competitively sensitive or proprietary
information is required to be released under a final rule, it is
imperative that growers respect the proprietary nature of the
information and not share it beyond their advisors, and that companies
be allowed to take steps to ensure their information is properly
protected.
Finally, in limiting the Proposed Rule to only those factors that
might conceivably advance AMS's stated goal, AMS should eliminate the
proposed governance framework, which, as explained, is unnecessary and
costly.
2. Scope of Regulated Parties
We urge AMS to exclude from the scope of the Proposed Rule poultry
grower compensation systems where there is a fixed base pay plus an
incentive-based bonus, regardless of how the bonus is calculated. The
regulations appear to contemplate only two contract types--flat payment
or a tournament system. In today's business environment, there are many
forms of contracting. NCC urges AMS to ensure its proposed regulations
allow sufficient flexibility to accommodate different types of
contracts and allow for innovative contracting. AMS's proposed
regulations should maintain a key feature of the current grower
compensation system: allowing performance incentives for global
competitiveness of the industry and rewarding the top performers and
those who invest in state-of-the-art practices and technologies. AMS
can accommodate market innovation and other ways of contracting by
revising the definition of ``poultry grower ranking system'' in 7 CFR
201.2 to address grower base payments as follows:
Poultry grower ranking system means a system where the
contract between the live poultry dealer and the poultry grower
provides for base payment to the poultry grower based upon a
grouping, ranking, or comparison of poultry growers delivering
poultry during a specified period.
In addition, the contract scenarios identified in the Proposed Rule
are overly simplified. For example, a poultry growing contract could
have both new and older housing in the same complex under the same
agreement. In addition, poultry growing contracts may cover multiple
complexes. AMS should ensure the Proposed Rule reflects and
accommodates differing contract structures.
Further, AMS should not exempt small dealers from the requirements
of this rule. In 201.100(e), the Proposed Rule would exempt small
dealers slaughtering fewer than two million live pounds of poultry
weekly from needing to provide a true written copy of the poultry
growing arrangement and the Live Poultry Dealer Disclosure Document
(``Disclosure Document'') to growers. If, as AMS asserts, the
information in the Disclosure Document is necessary for growers to make
informed decisions about investments in their business, no dealer
should be exempt from these requirements. The exemption could result in
growers leaving a dealer complying with the regulations for a small
dealer not subject to the same requirements.
3. Timing of Disclosures
The Proposed Rule would require dealers to furnish the Disclosure
Document whenever a dealer seeks to renew, revise, or replace an
existing growing contract or establish a new contract that does not
contemplate modifications to existing housing specifications. Because
contracts may be regularly amended to reflect changes in the business
environment, NCC urges AMS to modify the Proposed Rule to require
dealers to furnish the required information only at initial signing,
and then on a periodic basis (e.g., every year). This scheduled
disclosure of information would reduce administrative burdens on
dealers, ensure uniformity of the disclosures provided, and alleviate
confusion from growers who may receive different information at
different times.
B. AMS Should Address All Amendments to PSA Regulations in One
Rulemaking. Otherwise, All Changes Required of Industry Should
Have a Single Implementation Date
NCC is concerned that AMS is taking a piecemeal approach to
promulgating regulations for industries regulated by the PSA and urges
the agency to propose and implement all amendments in a single
rulemaking process. This Proposed Rule and the advance notice of
proposed rulemaking (87 Fed. Reg. 34814 (June 8, 2022)) issued on the
same day as the Proposed Rule signal AMS intends these regulatory
actions to be the first in a line of planned changes affecting the
poultry industry. Imposing constant regulatory changes on poultry
growers and dealers would spurn confusion, needless costs, uncertainty,
and frustration with shifting requirements.
In this already highly regulated sector operating on thin margins,
and given the multitude of uncertainty from external market factors,
businesses need certainty and predictability from regulators. Dealers
can only effectively shield growers from risk as described in section I
above if dealers themselves are afforded some level of certainty from
regulators. Affected parties can only evaluate the impact of proposed
changes and the actual costs of regulations if they are shown the
entire regulatory structure the agency proposes to implement. A
piecemeal approach obscures USDA's true intent, hides costs of constant
transitions, and fuels distrust in government. NCC urges AMS to be
transparent with industry about its plans.
Similarly, NCC anticipates AMS plans to incorporate the changes to
7 CFR 201.2 (terms defined) in future rulemakings. AMS should afford
industry the opportunity to comment on the changes to these definitions
with a full understanding of how they will apply to planned amendments.
Even if AMS moves forward with its piecemeal approach to
rulemaking, it should implement a uniform effective date for all
changes to PSA regulations currently identified in the Unified Agenda,
including ``Clarification of Scope of the Packers and Stockyards Act
(AMS-FTPP-21-0046)'' (RIN 0581-AE04) and ``Unfair Practices in
Violation of the Packers and Stockyards Act (AMS-FTPP-21-0045)'' (RIN
0581-AE05). Because the Proposed Rule contemplates that firms develop
and audit data in a certain way and that firms must disclose 5 years of
data, the effective date for disclosures by definition must be 5 years
after the implementation date for the auditing system. Any effective
date before 5 years after the implementation of the auditing system
would prevent consistent comparison and undermine the usefulness of any
disclosures. This timeframe also allows industry sufficient opportunity
to develop and implement the required data management systems and to
educate growers on information provided. Any period less than 5 years
is not sufficient because the industry would not be able to effectively
adapt in light of the considerable differences in what and how
information is maintained.
C. AMS Should Provide Ample Educational Resources for Regulated
Entities Regarding the Complex Changes in This Rule and Provide
Clarity on How the Proposed Regulations Would Be Enforced
Based on our communications with members to date and reporting on
the proposed regulations, we anticipate significant uncertainty from
regulated entities as to how AMS intends to implement this rule. Given
the breadth, complexity, and unique level of involvement in poultry
growing contracts, NCC strongly urges AMS to provide additional clarity
for industry through educational materials, information sessions, and
template disclosures.
In addition, AMS should work to ensure growers fully understand the
information provided to them by dealers, including what it does and
does not say. Instead of requiring contracting documents to include
boilerplate disclaimers, AMS should undertake education initiatives to
ensure contracts are fully understood. Finally, AMS should ensure its
educational initiatives reach non-English-speaking growers.
Specifically, AMS should ensure any educational events, guidance,
templates, and other regulatory materials are available in other
languages, particularly Spanish.
As it develops implementing and educational materials, AMS should
clarify how the agency plans to enforce its rule. In particular, NCC
seeks clarity on the following enforcement-related components:
How AMS will inspect the disclosure and auditing framework,
including how AMS will train staff to inspect financial
accounting systems;
How frequently the Disclosure Document must be updated;
How dealers can properly update the Disclosure Document to
correct errors if identified;
How required disclosures should reflect operational changes
to placement schedules;
If AMS moves forward with including forward-looking
projections in the rule, how the agency will evaluate the
accuracy of these projections. As discussed below, we reiterate
AMS should not penalize dealers if it forces them to estimate
projected income and costs that later turn out to be imperfect.
D. Comments on Proposed 7 CFR 201.100
1. Requirement To Include Minimum Placements and Stocking Densities in
Poultry Growing Contracts, 201.100(b)(5)
The Proposed Rule would create a new paragraph at renumbered
201.100(i)(2) requiring that contracts specify the minimum number of
annual placements and the minimum stocking density for such placements.
Imposing mandatory terms on private contracts is beyond the stated
goals and scope of the rulemaking, and these changes should be removed
from any final rule. According to AMS, this rulemaking is intended to
address perceived information asymmetries through mandatory information
disclosures to help growers better predict the income they might earn
under poultry growing arrangements. But these proposed requirements are
not mere disclosures. Rather, they would impose mandatory terms on
private contracts, which is vastly different than requiring information
disclosures.
Poultry growing contracts do not necessarily include terms
addressing guaranteed placement frequencies or durations. Accordingly,
this provision would potentially require amending potentially every
single grower contract. Doing so would impose substantial costs not
accounted for in AMS's cost analysis, and it could cause substantial
confusion if growers are all suddenly presented with new contracts to
accommodate these terms. Moreover, the Proposed Rule does not account
for the possibility that a grower may not wish to agree to amend a
contract or, worse, could create a situation where a grower might
refuse to enter into an agreement for the express goal of placing a
dealer in a position of regulatory noncompliance to bolster a
negotiating position. Moreover, including this information as a
contract term is redundant to the information that would be included in
the Disclosure Document, which would also include information about
minimum annual placements and minimum stocking densities.
Further, these proposed provisions fail to accommodate the breadth
of potential contracts used in the industry. Many growers operate under
flock-to-flock contracts, which some growers may prefer because they
provide flexibility to choose whether to take a flock and the ability
to seek other business partners. It is entirely unclear how a minimum
annual placement rate and minimum stocking density would even be
determined for a flock-to-flock contract. To the detriment of all
involved, this provision risks eliminating flock-to-flock arrangements
altogether. On the other end, some growers operate under long-term
contracts of ten, fifteen, or even twenty years. These long-term
contracts have their own benefits, including providing stability for
growers and dealers alike and helping parties commit to a long-term
business strategy. But it is impossible for anyone to predict placement
frequencies or stocking densities ten or fifteen years out. For
example, factors like increased growth rates, faster or slower growing
breeds, target bird size, and cleaning practices, to name a few, could
change significantly over a 10 year period, and all affect placement
frequency and stocking density (for example, faster-growing birds may
reduce grow-out time, allowing for more frequent placements, or larger
target weights may reduce initial stocking density). By requiring that
contracts guarantee minimum annual placements and minimum stocking
densities for the length of the contract, AMS risks driving many
desired contract types out of the market.
Moreover, guaranteeing a minimum number of placements risks putting
a party in breach of a contract and in violation of AMS regulations
under situations that would not violate the parties' bargained-for
agreement or constitute a PSA violation, leading to absurd results. For
example, a contract signed in November that guarantees three flocks
annually would likely see a grower receive at most one flock that year,
which could be viewed as a breach of the contract and a violation of
the Proposed Rule. A contract signed in late December might not see any
flocks delivered that year. Similarly, any number of factors might
result in a grower receiving fewer flocks than initially anticipated or
even no flocks in a given year, such as natural disasters (floods,
fires, hurricanes), public health emergencies and pandemics, avian
disease outbreaks and APHIS quarantines, unexpected market shocks, a
change in target bird size or breed, disruptions to key inputs, and
planned facility repairs or renovations. Force majeure clauses or other
contract provisions might address these situations, but it is unclear
which provision AMS would view as prevailing, and in any case
significant confusion could result. Likewise, a dealer should never be
required to continuing providing birds to a grower who neglects or
mistreats a flock, but a guaranteed placement provision might expose a
dealer taking steps to protect bird welfare to breach of contract
claims and allegations of PSA violations. Nor does this provision
address how to handle a situation in which a grower does not want to
receive a flock at a given time, perhaps due to medical issues, farm
repairs, improvements, or labor shortages.
Finally, AMS's concerns that contracts need to guarantee minimum
placements and densities for growers to make sound financial decisions
is misplaced. Chicken growers are experienced businesspeople who
understand their business, and they have been able to make good
decisions without this information for decades. Further, many farm
operations are financed, typically through loans from sophisticated
agricultural lenders. As demonstrated by decades of expanded poultry
production,\19\ for years, banks have had little problem determining
whether a grower's future income stream is sufficient to support a
loan, even without guarantees. The market has thus demonstrated this is
not an issue.
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\19\ United States Department of Agriculture Economic Research
Service, Poultry Sector at a Glance, (June 13, 2022) https://
www.ers.usda.gov/topics/animal-products/poultry-eggs/sector-at-a-
glance/.
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In light of these considerations, AMS should not finalize proposed
201.100(i)(2). If AMS were to conclude this information must be
provided, it would be more consistent with the rulemaking's rationale
to include minimum annual placements and minimum stocking densities as
tentative projections to be included in the Disclosure Document at
proposed 201.100(b)(5) (discussed next). If AMS were to keep the
proposed 201.100(i)(2) provisions in a final rule, it must revise the
rule to accommodate the above concerns.
2. Disclosure of Minimum Placements and Stocking Density Disclosures in
Proposed 201.100(b)(5)
All of the issues identified above in discussing proposed
201.100(i)(2) also apply to the requirement in proposed 201.100(b)(5)
that the Disclosure Document include the minimum annual placement
frequency and minimum stocking density, and it is critical that AMS
ensures that any final Disclosure Document requirement address those
concerns as well. Moreover, given that AMS anticipates that growers
will make financial decisions based on the Disclosure Document,
information about placements and stocking density should be presented
as tentative projections and expressly not as guarantees. The
Disclosure Document should make clear that actual placements and
densities may vary and will depend on any terms that might be specified
in the contract as well as factors that might be outside any party's
control and that growers should not rely on the projected placements.
3. Litigation Summary, 201.100(c)(1)
The proposed requirement in 201.100(c)(1) to include [litigation]
information should be omitted from any final rule because it is not
relevant to a grower determining how much income the grower might
anticipate receiving under a contract. If the purpose of the Proposed
Rule is to provide growers with more information to determine how much
income they might earn through a contract, it is hard to understand how
information about litigation--much of which likely has nothing to do
with grower contracts--is relevant to calculating what the contract
says a grower might earn under different situations. In fact, the
proposed litigation disclosure presents a number of issues:
The proposed disclosure is overly inclusive of all
litigation. The proposed disclosure would appear to require a
dealer provide information about all litigation between the
dealer and growers, without regard for the nature or merits of
the case. The proposal would appear to require even the
disclosure of a case that resulted in sanctions against the
plaintiff for filing frivolous claims. Especially for larger
companies, this could result in a lengthy disclosure of
virtually no value that is difficult and costly to maintain and
distracts from more important elements of the agreement. There
is no useful reason to require all this be listed, especially
when companies have multiple subsidiaries, and many lawsuits
would have nothing to do with PSA issues.
The disclosure risks skewing incentives in litigation.
Requiring that dealers list all litigation could create skewed
incentives not in the interest of any party to a litigation.
For example, if a dealer knows that settlements will be listed
on a disclosure, the dealer might be reluctant to settle cases
for fear of projecting a reputation as being quick to settle
and thus inviting more litigation, which would in turn make it
more difficult for growers and dealers to resolve disputes in
an efficient manner.
Keeping this information current would be extremely
burdensome. Especially for larger companies that are more
likely to have multiple cases ongoing, it would be highly
burdensome for companies to have to maintain and update this
information on an ongoing basis, especially with cases
involving multiple parties and highly active dockets.
Disclosure might violate court orders and settlement
agreements. There are a number of situations in which a dealer
might not be permitted to disclose information about a
litigation. For example, a key filing might have been made
under seal, or a settlement or court order might include a
confidentiality agreement preventing the parties from
disclosing any related information. As written, proposed
201.100(c)(1) would put a dealer in the position of having to
choose whether to violate AMS regulations by not disclosing a
case and certifying the disclosure or violating a court order
or settlement agreement.
The 6 year period is inconsistent with the rest of the
Proposed Rule. It is not clear why AMS proposes that the
litigation disclosure cover 6 years while other aspects of the
proposal, such as the financial disclosures, cover shorter time
periods.
It is unclear how to determine if a case fits into the
disclosure window. As proposed, a dealer must provide a summary
of litigation ``over the prior 6 years.'' It is unclear from
the proposal whether this would include cases filed in the past
6 years, cases that had an open docket at any point in the past
6 years, or something else.
4. Bankruptcy Information, 201.100(c)(2)
As with the proposed litigation disclosure, it is unclear why
disclosing a dealer's bankruptcy history would be relevant to
determining how much income a grower might anticipate earning under a
contract. A grower's potential income is based on the contract, not the
dealer's bankruptcy history. Bankruptcy history is publicly available
if a grower wants the information. For larger companies with multiple
subsidiaries, there may be relatively complex histories, making this
information both confusing and cumbersome to maintain. It is also not
clear why AMS proposed a 6 year period for bankruptcy history when
other provisions have shorter periods.
5. Statement Regarding Sale of Grower Facilities, 201.100(c)(3)
Again, it is unclear how this provision relates to determining how
much income a grower might anticipate earning under a contract, and
including it in the Disclosure Document is unnecessary. If the parties
wish to make any binding commitments about how facility sales will be
handled and whether a contract may be transferred, the parties can
address that in the contract itself.
6. Financial Disclosures, 201.100(d)
The proposed financial disclosures in proposed 201.100(d) would
require dealers to compile complex information, imposing significant
costs on dealers but providing growers little of value because past
economic information cannot be relied on to predict future economic
conditions. Fundamentally, a grower's income is determined as specified
in the contract and driven primarily by the grower's care and skill. If
these disclosures are required, AMS should consider several points:
Extraneous information not directly related to grower
payments should be omitted. As discussed earlier, financial
disclosures should require only the basic information necessary
for a grower to make a general assessment of potential income
under the agreement. Other information is extraneous for this
purpose and should be omitted given the burdens in assembling
and certifying this information. For example, the Disclosure
Document should not have to include contact information for a
state university extension service (proposed 201.100(d)(5)).
That information is readily available through other channels,
and AMS or state organizations can promote it through
educational outreach.
Flexibility is critical. Dealers should be provided as much
flexibility as possible in how they present the required
information and should be expressly permitted in the regulation
to provide additional qualification or disclaimers as they
determine may be appropriate.
Information should be limited to only the grower's local
complex. Different geographic areas face different economic
conditions that have little or no bearing on grower income in
different areas. For example, different regions will have
different costs of living, state and local tax structures,
state and local regulatory burdens, land costs, fuel costs, and
labor costs, to name but a few variations. Grower incomes may
vary across regions--even within the same company--to account
for these differences. Presenting income across a company or
for different complexes would be confusing because the income
might vary to reflect higher costs in some regions and would do
nothing to help a grower determine how much that grower might
earn in his or her local complex. The disclosure in proposed
201.100(d)(1) should be omitted from any final rule.
The quintile-based reporting system is too complex.
Reporting normalized income by quintile would make the
information difficult to read and understand. If this is
included in a final rule, for simplicity, the disclosure should
present the average income for the complex and the upper and
lower bounds of the range.
Five years of data is too long to be meaningful. Changes in
markets, product offerings, demand, global trade, and inflation
all make it difficult to draw meaningful conclusions from 5
year old data. If AMS mandates any such disclosure, a shorter
timeframe would be more appropriate.
The disclosure needs to include a disclaimer that past
income does not guarantee any future payments. The amount of
detail called for in the proposed financial disclosures risks
confusing growers into making inappropriate assumptions about
future income. Just as with financial investments, mandatory
backward-looking generalized income information should be
accompanied by a disclaimer making clear that past performance
or income does not guarantee any future income, and that actual
income will be governed by the terms of the contract, the
parties' performance, and possibly factors beyond anyone's
control. Dealers should also be permitted to provide any
additional disclaimers in the Disclosure Document that they
determine may be appropriate.
Forward-looking projections should not be required under any
circumstance. The supplemental forward-looking income
information contemplated in proposed 201.11(d)(3) is
inappropriate and should be omitted. First, it is entirely
unclear how a dealer might know that past grower annual
payments would or would not reflect projected grower payments,
as no one can predict future economic conditions. Second, it is
unclear what is meant when the proposal references past
payments not reflecting future payments ``for any reason.''
Past grower payments will never exactly match future grower
payments, and there are any number of reasons that might cause
changes. For one, inflation means that there will inevitably be
changes year-to-year in payments, but that should be no reason
for needing to project future income. Third, it is impossible
for dealers or anyone else to predict what grower payments will
be in the future, and requiring dealers to make future
projections puts them in an impossible position while doing a
disservice to growers, who might mistakenly treat projections
as guarantees. As recent years have demonstrated, natural
disasters, geopolitical events, supply chain issues, and
inflation can all affect future economic conditions, and they
are impossible to predict. Fourth, it is unclear how far into
the future any projections would need to be made. Instead of
providing forward projections, all financial disclosures should
include a caveat that past information is not indicative of
future results and that results will depend on a variety of
factors, some outside any party's control, as well as the
grower's performance.
If projections were required, they must be qualified and
exempt from any certifications. Projections are by definition
unlikely to be completely accurate, and in many cases, even
reasonable projections could be off by a significant amount. It
is impossible to certify the accuracy of a forward-looking
projection, which is one reason they are treated with such
caution in the financial world. If projections were to be
required, they must be exempt from any certifications, as no
officer can certify that a projection will be correct.
Moreover, projections would need to be accompanied by
substantial qualifiers explaining that the projections are
unlikely to reflect actual payments and should not be relied
on.
The grouping scenarios in the Proposed Rule are too
simplistic. The Proposed Rule appears to contemplate that a
grower will raise the same type of bird in the same type of
housing. In reality, some growers may have a mix of older and
newer housing and may raise distinct types of birds. It is
unclear how a dealer would be expected to treat these and other
types of mixed situations in preparing the proposed financial
disclosures.
AMS must clarify how to provide historical data for periods
before the effective date of any final rule. It is unclear how
AMS expects companies to obtain and handle financial data from
periods that predate the effective date of any final rule.
Companies may or may not currently possess the historical data
required to prepare the proposed disclosures. In the event a
company does possess such data, the company did not develop and
maintain it in anticipation of being used in financial
disclosures. AMS would need to explain how dealers can comply
with the financial disclosure and certification requirements if
historical data predating a final rule is required.
Information about grower variable costs is inappropriate.
Dealers should not be required to collect, produce, or certify
the accuracy of information about grower variable costs.
Growers are responsible for understanding and controlling their
costs of production, in keeping with the efficient allocation
of responsibilities in poultry grower compensation frameworks.
Dealers do not systematically maintain all of this information,
and any information provided could be incomplete or inaccurate.
Proposed 201.100(d)(4) should be omitted. If the provision
were included in a final rule, it should be accompanied by
significant qualification, it should be specifically exempt
from any certification, and it should not have to be included
in any governance framework.
7. Governance and Certification, 201.100(f)
The Proposed Rule includes a governance framework that AMS states
is intended to ``ensure the accuracy and completeness of the Disclosure
Document, and ensure the dealer's compliance with its obligations under
the PSA and the regulations.'' AMS hopes the framework will ensure
corporate attention and accountability. Such a governance framework is
unnecessary for the proposal, needlessly costly and complex, and
inappropriate for the type of information required in the proposed
disclosures. In addition, AMS has grossly underestimated the costs
associated with this portion of the Proposed Rule, especially because
this requirement goes beyond the scope of this proposal and requires
firms to evaluate their obligations under all PSA regulatory
requirements. We urge AMS to omit this requirement from the final
regulations for these reasons and those discussed earlier in these
comments.
If AMS were to include a governance framework in a final rule, it
should simplify the requirements and provide additional clarity on what
is required. AMS should particularly address the following:
Clarify what ``reasonably designed'' means. AMS must clarify
the agency's expectations for a ``reasonably designed''
governance framework, including providing an example of how
such a framework is designed with specifics about personnel
needs, review frequency, frequency of data updates, and nature
of executive review. The term ``reasonably designed'' should be
fully defined.
Omit the requirement for certification by an executive
officer. This requirement is unnecessary and inappropriate for
a contract document. It is inappropriate to require an
individual corporate official to personally certify the
proposed disclosures. A grower could have recourse if deceptive
statements were made in an agreement regardless of whether
someone certifies the information, and including this
requirement appears to be motivated by an effort to inject
individual liability into what is in essence a private
commercial contracting issue, which is wholly inappropriate.
AMS should continue its longstanding approach of permitting
companies to determine how best to comply with any regulatory
requirements. If a certification is included, it should certify
that the disclosures are made pursuant to a system designed to
capture generally accurate information rather than to the
accuracy of any particular information.
Exempt any forward-looking financial information required by
the regulation from any certification. This information is, by
definition, projections or estimates, the accuracy of which
cannot be guaranteed. Requiring a certification for forward
projections could lead growers to misunderstand the nature of
the projection and rely on it as guaranteed income.
Clarify ``material fact.'' In relation to the certification,
AMS needs to explain and provide examples of what constitutes a
``material fact'' such that its untruthfulness or omission
would render the Disclosure Document misleading.
8. Receipt by Growers, 201.100(g)
Proposed 201.100(g) should be revised to require that a dealer
maintain documentation that required disclosures were transmitted to a
grower through a reliable means of communication, and the grower's
signature should not be required as evidence of receipt by the grower
within the required time period. The Proposed Rule appears to require
that the dealer obtain the grower's signature as evidence that the
disclosures were provided within the required timeframe. However, a
dealer cannot control whether a grower signs the disclosures. For
example, mail delays, illness, internet outages, a grower's delay in
opening mail or email, vacation, natural disasters, or even a grower's
refusal to sign could all prevent a dealer from obtaining the signature
required under proposed 201.100(g)(2) despite timely delivery of the
disclosures. AMS should revise any final rule to expressly allow
dealers to show they used a reliable means of communication to deliver
a disclosure in a timely manner, such as placing the disclosure in the
mail, sending it by email, or delivering it by hand.
E. Comments on Proposed 7 CFR 201.214.
1. Placement Disclosures, 201.214(b)
If the placement disclosures in proposed 201.214(b) are included
in a final rule, AMS should consider several points:
``Health impairments'' requires clarification. It is unclear
what would constitute a health impairment of the flock or
breeder flock under proposed 201.214(b)(6). Health
impairments requiring disclosure should at the most be limited
to a medical diagnosis made in writing by a licensed
veterinarian that could reasonably affect the growth and
mortality of the broiler flock.
Third-party breeder information should be considered. Some
companies might obtain birds or eggs from third-party breeder
operations, which might consider the identity of the source
farm to be proprietary information or subject to a
nondisclosure agreement. AMS should address how a dealer should
make the placement disclosures when required information is
unavailable to the dealer or when a dealer is prohibited by law
or contract from providing the information.
Reinforce that adjustments are not required based on the
disclosed information. Proposed 201.214(b)(7) references the
disclosure of ``Adjustments, if any, that the dealer may make
to the calculation of the grower's pay based on the inputs in
(1) through (6) of this paragraph.'' We understand this to mean
that dealers are not required to make adjustments based on the
referenced information and that a payment system that does not
make adjustments based on this information would not be in
violation of the PSA. We urge AMS to reinforce this point in
any final rule.
2. Settlement Disclosures, 201.214(c)
Proposed 201.214(c) requires disclosure of much of the same
information as called for in 201.214(b), and the issues raised in the
above discussion apply to proposed 201.214(c) as well. Moreover,
dealers already provide the information used to calculate a grower's
payment under their contracts. Providing the additional information
called for in proposed 201.214(c) is unnecessary and would be
confusing to the extent the information is not actually part of the
contracted-for settlement calculation. If this disclosure were included
in a final rule, AMS should address the following:
Include proper context for the information. Because
disclosing at settlement information not actually used to
calculate payment could be confusing, dealers should be
permitted to include a statement providing context around the
information, including a statement that the disclosures address
only a limited number of factors and that the disclosed factors
are unlikely to fully or even substantially explain a grower's
relative performance.
Clarify how to address multiple housing types. It is unclear
how a dealer should address in the comparison sheets situations
involving different housing types on the same farm. AMS should
clarify this and other situations that do not fit neatly into
the scenarios contemplated in the Proposed Rule.
Clarify situations in which not all chicks are sexed. AMS
should provide clarity on how to address situations in which
the sex of birds may be known for some but not all of the
growers in the settlement pool.
Clarify feed disruption. AMS should clarify exactly when a
feed disruption occurs, such as when the feed lines have run
completely empty. AMS should also address how to handle a
situation in which all participants in the settlement pool
experienced substantially the same feed interruption (for
example, in the case of a natural disaster that affected all
growers in the settlement pool).
* * * * *
NCC appreciates the opportunity to comment on the Proposed Rule.
Please feel free to contact us with any questions. Thank you for your
consideration.
Respectfully submitted,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mike Brown,
President,
National Chicken Council.
appendix a
Live Chicken Production Trends [2022 Revision]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[Chicks].
Dr. Thomas E. Elam, President FarmEcon LLC, [email protected]
March 2022
Disclosures: This study was prepared for the National Chicken
Council. FarmEcon LLC was compensated for its preparation.
Introduction
This study presents the results of a 2022 broiler industry survey
designed to capture 2021 key live chicken production statistics. The
survey was designed by FarmEcon LLC and data were collected from
National Chicken Council (NCC) member companies. Conclusions drawn are
those of FarmEcon LLC. Statistics collected from the responding
companies included:
1. Number of live chicken production farmers;
2. Current contract duration;
3. Farmer tenure;
4. Newly granted contract duration;
5. Farmer age;
6. Farmer family experience in live chicken production;
7. Number of persons on waiting lists for entering live chicken
production;
8. Existing farmers wishing to expand current operations;
9. 2021 farmer turnover by major reason for departure and;
10. Variability of average live chicken contract fees compared to
beef and pork prices.
In addition, the study summarizes several key trends in broiler
production efficiency and returns. Loan quality data for live chicken
producers will be discussed.
Studies on broiler farmer returns and loan quality are not revised.
There are no updates available for these two studies that this study
utilized in 2015. However, more recent USDA 2021 poultry farmer
financial returns data were found and are cited.
Survey Results
The survey was collected during early 2022. Twenty companies
representing 83% of 2020 top 32 U.S. chicken company production as
reported by Watt Publishing responded.\1\
---------------------------------------------------------------------------
\1\ Watt Publishing. Poultry USA. ``2020 Top Poultry Companies.''
March 2021. Pp 14-50.
1. Companies responding to the survey reported on 8,971 live chicken
farmers. The reported farmers held 10,921 production
contracts. The 83% response rate implies that the survey is
---------------------------------------------------------------------------
very representative of all 32 top chicken companies.
2. Companies responding reported current contract duration, in
years, as shown below.
Contract Length
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The 32% flock-to-flock percentage is 10 points lower than the
42% reported in a 2015 NCC survey done for the prior
version of this report. Other contract durations are
correspondingly higher than the prior report.
Flock-to-flock contracts have no obligations for either party
past the current flock being grown. These contracts have
been criticized for not offering farmers long term
assurance of live chicken production with their current
company. However, long term contracts also can be canceled
for poor performance and not meeting contract terms. In
reality, a multi-year contract offers little additional
assurance over a flock-to-flock contract. Regardless of
stated contract duration, both parties need to agree that
the arrangement is beneficial if the contract is to
continue.
Companies reported that long term contracts are required, and
granted, for new construction. In most cases these
contracts run for 10 years or longer as required by
lenders.
3. Respondents reported on the length of time that their current
farmers have been with their company. Results are shown in
the graph below.
Farmer Tenure
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
More than half the farmers have been with their current company
for 10 years or more. Almost \3/4\ have been with the same
company for 5 years or more. These results are almost
identical to the prior version of this report.
4. Companies reported on contract duration for newly granted
contracts. Responses fell into two broad categories. For
contracts granted on newly constructed houses, whether
expansion or for a new farm, contracts are granted to
satisfy any lender requirements. That was reported to be
generally 10 to 15 years. At the other end of the spectrum,
many new contracts were granted on a flock-to-flock basis
on existing farms with no lender requirements involved.
Several companies also reported new multi-year contracts
are granted even without a lender requirement involved.
5. Companies reported on the ages of their current farmers. The
results for those who track this data show that the vast
majority, 80%, of farmers are 40 years old or older. Only
14 farmers were reported to be under 20 years old. This age
structure together with the length of time farmers have
been with a company is seen as implying that live chicken
production is dominated by experienced live chicken
producer owner-operators.
The live producer age structure implies that these farmers are
in the business for the long term. It also implies that
current farmers are, for the most part, financially
sustainable and stable. The relatively few farmers under
the age of 30 implies that entry may be somewhat difficult
for that age group.
In contrast to the overall U.S. labor force,\2\ but in common
with all farm operators, chicken farmers have relatively
few participants in the under-30 age cohorts. Except for
the oldest cohorts, chicken farmers and all farm operator
\3\ ages are much more comparable.
---------------------------------------------------------------------------
\2\ U.S. Bureau of Labor Statistics. Employment database found at
http://www.bls.gov/cps/cpsaat03.htm. Accessed 2/27/2022.
\3\ USDA. 2017 Agricultural Census report found at USDA/NASS Census
of Agriculture Chapter 1, Table 52 (https://www.nass.usda.gov/
Quick_Stats/CDQT/chapter/1/table/52/state/US/year/2017). Accessed 2/27/
2022.
---------------------------------------------------------------------------
Ages of chicken farmers indicate that they are generally
typical of other farmers but leave chicken farming at a
somewhat earlier age. This can be attributed to factors
such as ability to finance earlier retirement, time demands
of chicken raising, or that farm operators outside chicken
farming may remain part-time farm producers longer into
their later years. The relative lack of younger people in
farming reflects the difficulty of financing a farm at an
early age versus obtaining employment in other sectors. It
is often the case that entry into farming happens as a
result of an aging farm operator within the family of the
entering farmer being replaced by a younger family member.
Age cohorts for the overall labor force, all farm operators,
and chicken farmers of the surveyed companies are shown in
the graphs below.
Chicken Farmers in
U.S. Labor Force All Farm Operators * Survey
* Operators whose
principal
occupation is
farming, 2017
Census of
Agriculture.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
6. Companies reported on current farmer family experience in
contract chicken production. Of the current farmers 26%
were reported have to have had a family background in this
type of farming.
7. Companies reported that they have 1,672 applications from
potential live chicken producers who would like to get into
chicken production. Those applications are 19% of the
current farmers reported. This statistic is an indication
of the attractiveness of this type of farming for those not
involved in it today.
Also reported were 335 open applications from existing farmers
for expansion of their existing operations.
Taken together, these responses indicate active expansion and
investment interest on the part of potential and current
farmers. Indirectly the interest level shows that a
significant number of persons outside and inside live
chicken production regard it as an attractive farming
option and investment opportunity.
8. Companies reported on reasons for 2021 farmer departures. There
are many and varied reasons that farmers might leave a
chicken company. These, include among others, retirement,
financial distress in the farming operation, declining
health, farm catastrophes, to take an offer from another
company, and contract termination by a company.
9. Unfortunately, as in any business arrangement, not every
partnership works out to the satisfaction of both parties.
In the chicken farming business, we see both sides of this
fact. Producers can and do leave a company for what they
regard as a better opportunity with another company.
Companies have the right to terminate a farmer that is not
meeting their performance expectations or is not otherwise
living up to the terms of the contract.
The least likely reason, accounting for only 0.7%, for a farmer
leaving broiler production was contract termination on the
part of their company. There are several reasons for a
contract termination, but the major ones are poor bird
performance and failure to adhere to contract terms.
Put into a perspective of the total number of contract
producers and reasons for their leaving a company, contract
termination was the least numerous in 2021. Results of the
survey are presented in the graph below.
2021 Farmer Departures
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In 2021 563, or 6.3%, of live chicken farmers left their
company. The ``All Other'' category includes farmers who
moved to a different company. In many cases farmers who
left chicken production sold facilities that remained in
production after that farmer departed chicken raising. Only
if a production facility is so obsolete that it is not
financially attractive to keep it in production is it
normally abandoned.
Though not directly comparable, employee turnover due to job
separations in the overall economy averages 3-4% per
month.\4\ The 6.3% contract farmer figure is for an entire
year, and includes retirements. The major difference
between employee turnover and live chicken production is
that the chicken farmer has a significant financial
investment at risk in the business whereas most employees
do not. That farm investment makes chicken farmers, and
farmers in general, less mobile than employees.
---------------------------------------------------------------------------
\4\ U.S. Bureau of Labor Statistics. Job Openings and Labor
Turnover Summary. Job Openings and Labor Turnover Summary--2021 M12
Results (https://www.bls.gov/news.release/jolts.nr0.htm) (bls.gov).
Accessed 2/28/2022.
---------------------------------------------------------------------------
Live Chicken Production Technical Performance
The table below shows selected average live chicken performance
trends since 1925.\5\
---------------------------------------------------------------------------
\5\ Source: 1925-2020 NCC: http://www.nationalchickencouncil.org/
about-the-industry/statistics/u-s-broiler-performance. Accessed 12/17/
2021.
----------------------------------------------------------------------------------------------------------------
Average Daily Feed to Meat
Year Market Age Market Weight Gain Gain Feed Per Bird Mortality
----------------------------------------------------------------------------------------------------------------
Average Days Pounds, Grams Pounds of Feed Pounds Feed Percent
Liveweight per Pound of Per Broiler
Live Broiler
----------------------------------------------------------------------------------------------------------------
1925 112 2.50 10.12 4.70 11.75 18.00
1935 98 2.86 13.24 4.40 12.58 14.00
1940 85 2.89 15.42 4.00 11.56 12.00
1945 84 3.03 16.36 4.00 12.12 10.00
1950 70 3.08 19.96 3.00 9.24 8.00
1955 70 3.07 19.89 3.00 9.21 7.00
1960 63 3.35 24.12 2.50 8.38 6.00
1965 63 3.48 25.06 2.40 8.35 6.00
1970 56 3.62 29.32 2.25 8.15 5.00
1975 56 3.76 30.46 2.10 7.90 5.00
1980 53 3.93 33.63 2.05 8.06 5.00
1985 49 4.19 38.79 2.00 8.38 5.00
1990 48 4.37 41.30 2.00 8.74 5.00
1995 47 4.67 45.07 1.95 9.11 5.00
2000 47 5.03 48.54 1.95 9.81 5.00
2005 48 5.37 50.75 1.95 10.47 4.00
2006 48 5.47 51.69 1.96 10.72 5.00
2007 48 5.51 52.07 1.95 10.74 4.50
2008 48 5.58 52.73 1.93 10.77 4.30
2009 47 5.59 53.95 1.92 10.73 4.10
2010 47 5.70 55.01 1.92 10.94 4.00
2011 47 5.80 55.98 1.92 11.14 3.90
2012 47 5.85 56.46 1.90 11.12 3.70
2013 47 5.92 57.13 1.88 11.13 3.70
2014 47 6.01 58.00 1.89 11.36 4.30
2015 48 6.12 57.83 1.89 11.57 4.80
2016 47 6.16 59.45 1.86 11.46 4.50
2017 47 6.20 59.84 1.83 11.35 4.50
2018 47 6.26 60.42 1.82 11.39 5.00
2019 47 6.32 60.99 1.80 11.38 5.00
2020 47 6.41 61.86 1.79 11.47 5.00
-----------------------------------------------------------------------------------------------
%1925-2020 ^58% 156% 511% ^62% ^2% ^72%
----------------------------------------------------------------------------------------------------------------
Over the entire 1925-2020 span there was a steady improvement in
live chicken performance. In recent years the industry has held average
days to market steady and allowed improved ADG performance to be
expressed as higher average market weights. The result has been a bird
that is 156% heavier than 1925 on about the same amount of feed and in
58% fewer days. This improvement is due to both investments by chicken
companies and the financial incentives offered in the contracts between
the companies and their farmer partners.
Feed-to-gain improvement has slowed since 1995. This is entirely
due to raising birds to ever-heavier weights at a constant 47-48
average days of age. Note that while days to market stopped declining,
average market weights accelerated. All else equal, as chicken weights
increase FCR performance tends to decline. Maintaining FCR at
increasing average weights over time is actually a significant
performance improvement. As will be shown below, increasing average
weights at 47-48 days has also been a significant benefit for chicken
farmers.
Death loss declines were rapid until about 1960 but have plateaued
at 4-5% in recent times.
The next table translates chicken productivity increases into live
pounds per square foot produced in farmer facilities and grower
payments in current and 2012 dollars.
----------------------------------------------------------------------------------------------------------------
Average
Grower Average Live Young Total Average
Payment, Grower Chicken Grower Live Pounds Grower
Year Cents/Lb., Payment, Production, Payments, % Change Per Sq. Foot Payments,
Current Cents/Lb., 000 Pounds $2012, 000 Per Sq.
Dollars $2012 Foot, $2012
----------------------------------------------------------------------------------------------------------------
1990 4.08 6.33 25,549,696 $1,617,672 4.8% 33.12 $2.10
1991 4.11 6.19 27,170,780 $1,680,540 3.9% 33.44 $2.07
1992 4.14 6.10 28,997,878 $1,768,320 5.2% 33.77 $2.06
1993 4.22 6.08 30,474,243 $1,851,444 4.7% 34.09 $2.07
1994 4.23 5.96 32,765,941 $1,954,314 5.6% 34.77 $2.07
1995 4.32 5.97 34,352,980 $2,051,491 5.0% 34.93 $2.09
1996 4.30 5.84 36,034,815 $2,104,723 2.6% 34.75 $2.03
1997 4.46 5.96 37,207,401 $2,219,110 5.4% 34.87 $2.08
1998 4.53 5.99 38,054,849 $2,280,572 2.8% 35.26 $2.11
1999 4.68 6.09 40,444,167 $2,463,925 8.0% 36.09 $2.20
2000 4.78 6.07 41,293,525 $2,508,363 1.8% 36.23 $2.20
2001 4.87 6.07 42,335,507 $2,569,145 2.4% 36.03 $2.19
2002 4.81 5.89 43,715,247 $2,575,580 0.3% 34.64 $2.04
2003 4.90 5.88 44,317,531 $2,606,601 1.2% 37.22 $2.19
2004 5.04 5.88 46,109,201 $2,709,460 3.9% 38.56 $2.27
2005 5.24 5.92 47,578,696 $2,814,545 3.9% 39.15 $2.32
2006 5.39 5.93 48,332,516 $2,863,716 1.7% 38.97 $2.31
2007 5.43 5.82 49,089,999 $2,856,088 ^0.3% 38.56 $2.24
2008 5.64 5.93 50,441,600 $2,992,748 4.8% 38.84 $2.30
2009 5.62 5.90 47,752,300 $2,816,920 ^5.9% 38.19 $2.25
2010 5.67 5.85 49,152,600 $2,877,597 2.2% 38.48 $2.25
2011 5.78 5.86 50,082,400 $2,932,593 1.9% 39.40 $2.31
2012 5.85 5.81 49,655,600 $2,883,515 ^1.7% 39.07 $2.27
2013 5.93 5.78 50,678,200 $2,931,633 1.7% 39.12 $2.26
2014 6.19 5.94 51,378,700 $3,053,616 4.2% 39.52 $2.35
2015 6.27 5.97 53,376,200 $3,187,929 4.4% 40.03 $2.39
2016 6.42 6.03 54,259,100 $3,271,137 2.6% 39.93 $2.41
2017 6.63 6.10 55,573,900 $3,390,586 3.7% 39.04 $2.38
2018 6.84 6.15 56,797,700 $3,494,614 3.1% 38.31 $2.36
2019 6.93 6.13 58,259,100 $3,573,514 2.3% 38.08 $2.34
2020 7.02 6.13 59,405,600 $3,644,069 2.0% 38.09 $2.34
--------------------------------------------------------------------------------------------------
% Increase 72.1% ^3.1% 132.5% 125.3% N/A 15.0% 11.4%
----------------------------------------------------------------------------------------------------------------
Farmers have benefited from this improved performance. The
investments made in genetics and feeds by their companies have
increased the throughput of their facilities, resulting in increased
production per square foot of their chicken housing. The table above
shows how that increased performance has expressed itself in increased
constant dollar farmer payments per square foot of their owned chicken
housing.\6\ Payments per square foot in 2012 dollars did decline
slightly between 2016 and 2020 as companies changed to slightly slower
growing breeds.
---------------------------------------------------------------------------
\6\ Sources: Agri Stats bird performance data, obtained 2/1/2022.
GDP deflator, 2012=100, obtained from the U.S. Bureau of Economic
Analysis at https://apps.bea.gov/iTable/
iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey.
Accessed 2/15/2022.
---------------------------------------------------------------------------
While average current dollar farmer payments per pound of chicken
have increased 72% since 1990, corrected for overall inflation, those
payments have declined slightly. However, a 15% increase in average
pounds of chicken production per square foot of farmer-owned housing
has more than compensated for the decline in inflation-corrected
payments per pound. Though declining slightly in recent years, the
overall result is that inflation-corrected annual farmer payments per
housing square foot have increased over 11.4% since 1990.
The gains reflect both company investments in chicken performance
and farmer improvements their housing required to take advantage of
that increasing chicken performance capability.
While farmer payments per pound are highly visible to both farmers
and their companies, payments per square foot are not. Arguably,
payment per square foot is a much better farmer payment and return on
investment metric than payment per pound of chicken raised.
Contract farmers and their companies have mutually benefited from
the investments that have improved bird performance. Farmers who focus
on payment per pound of chicken could be looking at a more meaningful
metric that includes both a payment per pound measure and the
productivity trend of their housing investment.
Live Chicken Producer Income Stability
Survey data were collected for 2020-2021 monthly average chicken
farmer payments per pound of live chicken production. From these data
the average, standard deviation and coefficient of variation (CV) were
calculated. The average over all months and all companies was 6.76 per
pound, the standard deviation was 0.11 per pound, resulting in a CV of
1.6%. This overall CV is a statistical measure of the variation in
monthly average payments relative to the 2 year average. It has little
meaning unless compared to other CV statistics for similar data.
Spreadsheet data for U.S. average cattle and hog prices were
obtained from the Economic Research Service of USDA and CV was
calculated for each.\7\
---------------------------------------------------------------------------
\7\ USDA/ERS. Historical Livestock Prices Spreadsheet.
LivestockPrices.xlsx (https://view.officeapps.live.com/op/
view.aspx?src=https%3A%2F%2Fwww.ers.usda.gov%2Fwebdocs%2F
DataFiles%2F51875%2FLivestockPrices.xlsx%3Fv%3D8178.6&wdOrigin=BROWSELIN
K). Accessed 3/1/2022.
---------------------------------------------------------------------------
For all slaughter cattle prices reported in the spreadsheet the
average was $1.42 cents per pound, standard deviation $0.19 and CV was
13%. For hogs the average was $0.55 per pound, standard deviation $0.16
and CV 29%.
Cattle and hog prices represent the payments to producers for each
pound of live animal delivered to market. In that respect they are
similar to broiler farmer fees received from broiler companies.
However, in another respect broiler payments are different. Cattle and
hog prices are market-based. Broiler farmer fees are contract-based.
Broiler farmer fees paid to individual farmers are subject to variation
around the contract average based on terms and conditions that
determine premiums and discounts based on broiler performance. However,
overall cattle and hog average prices also do not reflect variation in
individual producer prices received based on live animal quality that
also result in price premiums and discounts.
Also, cattle and hog producers pay for feed and the animals they
raise out of their income stream. Broiler farmers receive feed and
chicks from their companies at no cost.
The conclusion is that overall average producer payments per pound
of live animal produced are much less variable for broiler farmers than
payments to cattle and hog producers.
Live Chicken Producer Financial Performance
Statistics on live chicken producer returns are not routinely
gathered by USDA or any known university farm records systems. In 2011
USDA did conduct a special financial survey that included live chicken
farmers. Results of that survey are detailed in an August 2014 article
by USDA economist James MacDonald.\8\ This study is reported here for
historical context.
---------------------------------------------------------------------------
\8\ MacDonald, James. ``Technology, Organization, and Financial
Performance in U.S. Broiler Production.'' USDA. Economic Information
Bulletin Number 126. June 2014. Found at Technology, Organization, and
Financial Performance in U.S. Broiler Production (https://
www.ers.usda.gov/webdocs/publications/43869/48159_eib126.pdf?v=5006.2)
(usda.gov). Accessed 2/1/2022.
---------------------------------------------------------------------------
The survey showed that farmers who raise broilers under contract
generally realize higher average incomes than other farm households and
other U.S. households. However, the range of household incomes earned
by broiler farmers is also wider than other groups.
MacDonald compared average incomes using the median, at which half
earn less than and half earn more. In 2011, the median income among all
U.S. households was $50,504, while the median income among farm
households was $57,050. The $68,455 median for chicken farmers was
significantly higher than both all farm households and all U.S.
households. Sixty percent of chicken farmers earned household incomes
that exceeded the U.S.-wide median.
In part the higher income spread was due to a wide scale of live
chicken production among chicken operations. Larger producers may also
be better at raising chickens and receive higher payments per pound
based on their higher-than-average performance. Similar to all
businesses, those who are most successful at raising chickens will tend
to earn more income than those who are less successful.
MacDonald also points out that the contracting system has
substantially reduced some financial risks borne by contract farmers.
Feed, medication and baby chick costs are the responsibility of the
chicken company. As MacDonald points out, ``These risks are not small;
feed prices rose or fell by at least five percent in 11 of the 60
months between January of 2009 and December of 2013. Poultry companies
also bear production risks that commonly affect farmers. For example,
if weather or disease affects mortality among all farmers, base payment
rates remain the same.''
Comparing the top 20% of live chicken farmer returns to the same
statistic for other farm households and all U.S. households shows a
significant advantage for top performing contract chicken producers.
Median incomes are also higher for chicken farmers, while at the bottom
end, the lowest 20% are slightly lower than all farms, but comparable
to the U.S. average. Chicken farmer incomes have a wider range than all
farms and all households, but this is almost entirely due to the
significantly higher level of the top 20% of chicken farmer incomes.
The graph below shows the results for these three income
categories.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
As this is only 1 year of data the results need to be viewed with
some caution. Farm incomes, especially for farms not selling on
contracts, can vary widely from year to year. Still, the results do
tell a story about the relative returns of live chicken production. At
the top end and on average, well-run chicken farms tend to earn
significantly more than both the average U.S. farm and U.S. non-farm
household.
Recent USDA data also show that over the last decade poultry farms
have on average financially outperformed the average farm. From 2010 to
2021 average poultry farm net farm income was $59,800 compared to
$38,200 for all farms.\9\ The averages cannot be directly compared to
the medians reported in the MacDonald report but directionally the
conclusion is the same.
---------------------------------------------------------------------------
\9\ USDA, Agricultural Resource Management Survey. Found at USDA
ERS Reports (https://my.data.ers.usda.gov/arms/tailored-reports).
Accessed 3/7/2022.
---------------------------------------------------------------------------
Comparative Live Chicken Production Loan Performance
Available agricultural lender statistics also strongly support the
USDA survey showing that live chicken production has favorable returns
compared to other farming activities.
In 2015 NCC obtained loan quality data from the Small Business
Administration, a significant lender to live chicken producers. The
data showed significantly lower charge off and deficiency percentages
for chicken producers compared to all agricultural loans.
The deficiency rate for live chicken farmers was about \1/3\ the
rate for all agricultural loans, and the charge-off rate was less than
30% of all agricultural loans.
These loan results also support the financial advantages of
contract chicken production compared to other types of farming
operations. The following graph summarizes an overview of these
data.\10\ The vastly different chicken farmer loan results are largely
due to the lower level of cost and income risks that are the result of
the specific contracting arrangements between chicken farmers and their
companies.
---------------------------------------------------------------------------
\10\ Source: NCC. Data obtained from Government Loan Solutions,
Inc. 9/11/2015.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Summary and Conclusions
Data from the NCC survey and evidence from third party sources all
show that live chicken production is broadly and generally being run by
a group of effective and experienced farmers. Chicken farmers generally
have higher incomes compared to all farms and all U.S. households, and
have an age structure that is similar to all farm operators. Compared
to the entire U.S. labor force both chicken farmers and all farm
operators tend to be older than non-farm employees. This is seen as a
result of the substantial financial investment often required to enter
farming.
The 2021 turnover rate of chicken farmers was 6.3%, the majority of
which was voluntary or due to external factors beyond the control of
companies and farmers.
Responding companies also reported significant waiting lists for
those who would like to enter live chicken production or expand
existing operations.
An analysis of farmer payment data obtained from Agri Stats showed
that inflation-corrected farmer payment rates per square foot of farmer
owned housing have increased over time. The increase is due to improved
bird daily weight gain performance that has increased with no
significant effect on feed used per bird. Chicken companies who furnish
the feeds have benefited from the feed efficiency gains. Farmers who
furnish live chicken housing have captured the benefits of increased
growth rates.
The current contracting system has helped promote the steady
improvements in live chicken performance that have benefited chicken
farmers, the companies they produce for, and ultimately consumers. Both
farmers and their companies benefit from those performance gains.
A USDA farm financial survey shows that broiler producers generally
have significantly higher incomes than all other farming enterprises
and the average U.S. household. The lowest 20% of contract farmer
incomes are only slightly less than the similar statistic for all U.S.
households, but lower than bottom 20% of all farm operators.
SBA farm loan data show much lower loan deficiency and charge-off
rates for live chicken production than all agricultural loans. These
data support the findings of the USDA survey.
Agri Stats data show that inflation-corrected farmer income per
square foot of chicken housing has benefited financially from increases
in chicken growth rate performance. Higher growth rates are primarily
the result of breeding investments made by chicken companies and farmer
investments in their own operations that help chickens realize their
improving genetic potential. Average daily gains have decreased in the
last few years, but have been partially offset by higher payments per
pound.
Viewed in totality, live chicken production is a viable, mutually
beneficial and attractive farming enterprise for the vast majority of
farm families who raise chickens in partnership with the companies they
work with.
Exhibit 3: NCC Comments to Docket No. AMS-FTPP-21-0046 Poultry Growing
Tournament System Fairness and Related Concerns (Sept. 6, 2022)
September 6, 2022
Submitted electronically via regulations.gov
Bruce Summers,
Administrator,
Agricultural Marketing Service,
United States Department of Agriculture
Docket Clerk,
Agricultural Marketing Service,
U.S. Department of Agriculture,
Washington, DC
Re: Docket No. AMS-FTPP-21-0046, Poultry Growing Tournament Systems:
Fairness and Related Concerns
Dear Mr. Summers:
The National Chicken Council (NCC) appreciates the opportunity to
provide comments on the United States Department of Agriculture (USDA)
Agricultural Marketing Service (AMS) advance notice of proposed
rulemaking entitled, ``Poultry Growing Tournament Systems: Fairness and
Related Concerns'' (ANPR).\1\ NCC is the national, nonprofit trade
association that represents vertically integrated companies that
produce and process more than 95 percent of the chicken marketed in the
United States. NCC members would be directly affected by changes to
poultry grower contracting, including those contemplated in the ANPR.
---------------------------------------------------------------------------
\1\ 87 Fed. Reg. 34814 (June 8, 2022), https://www.govinfo.gov/
content/pkg/FR-2022-06-08/pdf/2022-11998.pdf.
---------------------------------------------------------------------------
As explained in more detail in these comments, NCC strongly opposes
further rulemaking by AMS regarding the current poultry grower
contracting system. In addition, we incorporate by reference our
comments filed on August 23, 2022, to docket No. AMS-FTPP-21-0044
regarding AMS's Transparency in Poultry Grower Contracting and
Tournaments Proposed Rule.\2\ NCC is deeply concerned that changes to,
or elimination of, the tournament system would have a devastating
financial impact on the U.S. chicken industry by raising costs,
contributing to increased food prices for consumers, and ultimately
destabilizing a successful compensation system. NCC urges AMS to
refrain from further steps that would undermine a successful
compensation system.
---------------------------------------------------------------------------
\2\ NCC Comments to Docket No. AMS-FTPP-21-0044, Comment ID AMS-
FTPP-21-0044-0487 (Aug. 23, 2022), https://www.regulations.gov/comment/
AMS-FTPP-21-0044-0487.
---------------------------------------------------------------------------
I. The Current Poultry Grower Contracting System Is a Well-Designed,
Efficient Structure That Benefits Growers, Dealers, and
Consumers
NCC supports the current poultry grower compensation system and
champions it as a structure that fairly rewards family farmers for
efficient use of resources and innovation in raising high-quality
birds. The current system's fair, honest contracts provide a target pay
that high-performing growers can supplement with the efficient use of
resources. This system promotes superior results that lower chicken-
raising costs, encourage efficient use of resources, and benefit
growers, live poultry dealers (``dealers''), and consumers.
To briefly describe the performance structure, dealers deliver
broiler chicks to growers on the day the chicks hatch. Growers raise
the chicks into broilers using feed, veterinary care, and other
consultants like animal welfare experts that are provided by the
dealer. Growers are responsible for providing quality housing, farm
maintenance, on-farm inputs, and day-to-day care of the broilers.
In a typical grow-out contract, growers and dealers agree on a pre-
determined target price per pound of weight gain based on an average.
The specifics vary, but growers are usually either paid the target plus
a bonus for high performance, or grower payments are adjusted slightly
upward or downward from the target based on relative performance.
Overall, regardless of the approach taken, growers earn a predictable
payment plus the opportunity to earn a bonus for strong performance.
This approach rewards skilled growers who have honed their management
practices to most efficiently raise healthy birds.
The tournament system's incentive-based pay structure rewards
grower efficiency and innovation and promotes bird welfare.
The current poultry grower compensation system operates like any
arrangement between a business and a service provider, where a service
provider competes with others to provide the best services as
efficiently as possible to increase the provider's net compensation and
where businesses compete to secure the best service providers at
profitable rates. Growers are provided the same quality resources--
broilers, feed, access to veterinary care and consulting--and use their
farming skills to produce high-quality birds at the lowest cost. This
rewards-based system allows dealers to incentivize efficient use of
resources, innovation in management practices, and grower investments
in housing and care.
Growers not only take seriously their responsibility to ethically
raise their birds, but, through the current compensation system, they
also have every business incentive to ensure their birds are well-cared
for. Properly cared-for birds experience optimal growth rates and have
lower mortality, both of which increase a grower's pay. This contract
structure allows the well-being of birds to be a dealer's and grower's
top priority because incentives are given to farmers who raise the
healthiest, highest-quality birds. Similarly, dealers have every
incentive to make sure their growers succeed and produce healthy,
quality birds. If a dealer sees a flock struggling or identifies
opportunities to increase efficiency, the dealer will provide the
grower with assistance through technical experts that are familiar with
the breed, business, and growing conditions to help the grower maximize
his or her potential.
This process results in a highly efficient market and contributes
to the global cost-competitiveness of U.S. chicken meat. Chicken meat
is a wholesome, nutritious lean protein that has never been more
affordable in the U.S., both on a real-dollar basis and when viewed
against a typical household's overall buying power. This is despite the
immense inflationary pressures facing consumers and businesses from all
directions.
The tournament system efficiently allocates risk to the parties
best equipped to handle it.
The current poultry grower contracting system has evolved to
efficiently allocate economic risk to the parties best prepared to
burden it. In fact, data show that chicken companies remove
approximately 97 percent of the economic risk from growers as compared
to independent growers.\3\ Dealers supply growers with a variety of
necessary inputs, including broiler chicks, feed, medication and
veterinary care, technical advice, and other resources. This removes
much of the economic risk from factors like shifting feed prices and
market uncertainty from contract growers to dealers, whereas
independent growers would shoulder the entirety of that risk
themselves. If feed prices skyrocket during a contract term, or weather
or disease affect mortality rates among all growers, the contracted-for
grower base payments would not change.
---------------------------------------------------------------------------
\3\ C.R. Knoeber & W.N. Thurman, ``Don't Count Your Chickens . .
.'': Risk and Risk Shifting in the Broiler Industry, 77 Am. J.
Agricultural Econ. 486, 496 (1995).
---------------------------------------------------------------------------
Many of the capital-intensive inputs listed above benefit from
large-scale purchasing. For example, broiler chicks themselves are
expensive inputs, given the advanced genetics and breeding management
required to produce them. Dealers operate at scale and are best
equipped to manage the complicated chick supply chain, including
hatcheries and grandparent flocks of sufficient size and scale to
supply all their farms. It would be impossible for an individual farmer
to source chicks with anywhere near the same consistency and efficiency
as dealers. The contract structure also protects buyers from needing to
find a market for the birds once fully raised. The contract terms
remain in effect for the duration of the agreement, regardless of
whether demand for chicken meat plummets and affects a dealer's
profits. A grower will always get paid for the birds he or she raises
and does not have to face the risk of investing heavily in a flock only
to have the market crater when it comes time to harvest those birds.
Another major input dealers supply that presents significant risks
is feed. Feed is typically the greatest input cost in raising chickens.
Dealers secure or produce feed at significant scale and volume, and
they do so with their specific bird breeds or customer specifications
in mind. In particular, a major ingredient in chicken feed is corn,
which regularly experiences significant price fluctuations, depicted in
Figure 1 below. These price fluctuations result from government
policies like Renewable Fuel Standard mandates, competing end-users,
geopolitical events, and droughts and other major weather events. These
price fluctuations could be catastrophic for individual farmers if they
had to secure feed on the open market. But under the current system,
dealers have the scale and resources, including access to sophisticated
hedging strategies, to secure feed at favorable prices and they are
better positioned to absorb unexpected increased feed costs. Grow-out
contracts are agnostic to feed prices, and the grower is insulated from
these potentially devastating input risks.
Figure 1, U.S. Corn Market Prices, January 2008-July 2022 \4\
---------------------------------------------------------------------------
\4\ Feed Grains Database, USDA Economic Research Service (accessed
September 1, 2022), https://www.ers.usda.gov/data-products/feed-grains-
database/.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Similarly, dealers are best equipped to secure medication and
veterinary care for the chickens. Rather than requiring each grower to
retain a veterinarian, schedule veterinary visits, and obtain
medication, dealers coordinate veterinary care to ensure birds are well
cared for. Alleviating growers from arranging veterinary care also
ensures that a grower's economic incentive is aligned with protecting
bird health. Whereas an independent grower might have an economic
incentive to pay for veterinary services only when it is absolutely
clear that care is necessary, contract growers have every incentive to
reach for veterinary services whenever they might be needed, better
protecting bird health overall. Additionally, because a dealer's
veterinarians cover many growers, they are able to work at a more
efficient scale and are extremely familiar with the type of birds they
are caring for.
This arrangement removes the overwhelming majority of the economic
risk that growers would otherwise face, allowing contract growers to
dedicate consistent attention and resources to providing high quality
care, land, and housing for their birds. This partnership dynamic
promotes the economic vitality and independence of family farms by
promoting stable and predictable income. As described in more detail in
Section II, the benefits of this partnership structure were highlighted
during the industry's successes during the COVID-19 pandemic, where the
industry maintained steady profits for growers even in serious economic
uncertainty and supply chain disruptions.
The American poultry industry is the most competitive in the world
in significant part because the poultry grower compensation system
encourages innovation and investment in the best equipment and
practices. NCC is proud to represent an industry that consistently and
continuously produces affordable protein, even in times of soaring
across-the-board inflation and economic distress that increase prices
for consumers.
II. Data Show the Current Poultry Grower Contracting System Is
Profitable and Works Well for Growers
NCC commissioned an independent study, published earlier this year
by Dr. Tom Elam, that captures live chicken production statistics from
2021 and summarizes key trends in broiler production efficiency,
returns, and loan quality data (the ``Elam Study'', attached as
Appendix A).* \5\ The study incorporates the most recent publicly-
available government data and analyzes the results of a recent survey
of chicken growing contracts. The survey results indicate that current
poultry grower contracting relationships are mutually beneficial,
successful, and profitable for both growers and dealers.
---------------------------------------------------------------------------
* Editor's note: the report entitled Live Chicken Production Trends
was attached as Appendix A to the previous comment letter submitted as
Exhibit 2. See page 107.
\5\ T. Elam, Live Chicken Production Trends, FarmEcon, LLC (Mar.
2022), https://www.nationalchickencouncil.org/wp-content/uploads/2022/
03/Live-Chicken-Production-FARM
ECON-LLC-2022-revision-FINAL.pdf [hereinafter ``Elam Study''].
Despite having options to work with different dealers, most growers
---------------------------------------------------------------------------
have been with their current dealer for over 5 years.
Most growers are in a position to choose between partnering with
two or more processors and can readily cut ties with a bad business
partner. Over 50 percent of growers have been with their current dealer
for 10 years or more, a statistic unchanged from 2015, with an
additional 20 percent (for a total of 70 percent) having been with
their current dealer for over 5 years.\6\ A majority of the contracts
considered in the study were for 5 years or less, and \1/3\ were for
flock-to-flock arrangements. This shows that most growers, when
presented with the opportunity to stay with their dealer or to test the
market, find it better to stay with their dealer and renew their
agreement.
---------------------------------------------------------------------------
\6\ Id. at 3.
---------------------------------------------------------------------------
In addition, only 6.3 percent of the study respondents' farmers
left their company in 2021, a statistic that includes retiring
growers.\7\ A grower may part ways with his or her dealer for a variety
of reasons, including retirement, financial distress, and declining
health. Of the 6.3 percent of grower departures, only 0.7 percent was
from growers leaving the industry due to contract termination by the
dealer.\8\ These data show that growers and dealers both willingly
continue doing business after their initial contracts end and that
exceedingly few growers see their contracts terminated, further showing
the current partnership contracting system is mutually beneficial.
---------------------------------------------------------------------------
\7\ Id. at 5.
\8\ Id. A dealer may terminate a contract for various reasons, but
most often the reason is tied to poor bird performance or failure to
adhere to contract standards.
---------------------------------------------------------------------------
Figure 2, Reasons for Farmer Departures, 2021 \9\
---------------------------------------------------------------------------
\9\ Id.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The features of the tournament system allow chicken growers to earn
---------------------------------------------------------------------------
a profitable wage.
The Elam Study found that USDA data showed, in 2011, the $68,455
median income for chicken farmers was significantly higher than the
median income of both U.S. farm households and U.S. households (not
restricted to farm households). Sixty percent of U.S. chicken farmer
household incomes exceeded the U.S.-wide median.\10\ In addition, the
top 20 percent of contract chicken farmers earn on average $142,000,
significantly higher than the top 20 percent of all farm households
($118,000) and the top 20 percent of all U.S. households ($101,000),
according to the same data.\11\ Although USDA has not since updated the
study reporting this data, there is every reason to believe that these
trends have continued. For example, a different USDA dataset showed
that, from 2010-2021, average poultry farm net farm income was $59,800,
compared to $38,200 for all farms.\12\
---------------------------------------------------------------------------
\10\ Id. at 9.
\11\ Id. at 10.
\12\ Id. This study used different data and is not directly
comparable to the figures in the study reporting the 2011 income,
although the same trend bears out--chicken farming generates more
income than the average farming operation.
---------------------------------------------------------------------------
Figure 3, Income Variations Between Contract Chicken Production, All
Farm Households, and All U.S. Households, 2011 \13\
---------------------------------------------------------------------------
\13\ Id. (referencing 2011 data from a USDA financial survey as
analyzed by J. MacDonald, Technology, Organization, and Financial
Performance in U.S. Broiler Production, USDA Economic Information
Bulletin Number 126 (June 2014)).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The tournament system's features benefit the health and well-being
---------------------------------------------------------------------------
of chickens.
In 2021, the average on-farm livability of a flock of U.S. broiler
chickens was almost 95 percent, compared to only 82 percent in
1925.\14\ This improvement in production practices is driven in large
part by directly incentivizing growers to properly care for their
birds.
---------------------------------------------------------------------------
\14\ Id. at 6.
Interest in entering the broiler growing industry remains high,
showing that the industry can not only retain its current farmers but
---------------------------------------------------------------------------
that there is room to grow.
The Elam Study's findings show interest in entering the broiler
growing industry remains high. Companies responding to the survey
reported significant waiting lists for entrepreneurs seeking to enter
live chicken production or current farmers looking for opportunities to
expand their operations. There were 1,672 applications from potential
growers and 335 expansion requests from existing farmers.\15\ These
applications indicate a steady interest in entering contract chicken
production and excitement about entering an industry with a reputation
for profitable arrangements.
---------------------------------------------------------------------------
\15\ Id. at 4.
---------------------------------------------------------------------------
Default rates on loans for poultry growers and dealers are low.
As depicted in Figure 4, the Elam Study found that the deficiency
percent and charge-off percent for poultry grower loans amount to
merely \1/3\ of the average agricultural loan, based on Small Business
Administration loan quality data.\16\ The data overwhelmingly show that
growers and their lenders can effectively and accurately evaluate
expected income from poultry growing arrangements. Moreover, these data
show growers can earn steady incomes from their growing arrangements
that allow them to adequately service their debt obligations, directly
dispelling any allegations that growers are somehow saddled with
unsustainable debt loads.
---------------------------------------------------------------------------
\16\ Id. at 11.
---------------------------------------------------------------------------
Figure 4, Default Rates for Contract Chicken Producers and All
Agricultural Loans, 2015 \17\
---------------------------------------------------------------------------
\17\ Id. at 11.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
III. AMS's Changes to Poultry Grower Contracting Contemplated in the
ANPR Suggest Fundamental Changes That Would Hobble Poultry
Producers and Dismantle the Current Successful Compensation
System
NCC is gravely concerned that the policy proposals telegraphed in
the ANPR would impose substantial costs on the broiler industry and
would undermine the functioning of the very successful grower
compensation system. At a time when input costs are soaring and
inflation continues to be a top concern for American households, AMS
should avoid imposing regulatory burdens that would increase costs for
producers and add costs to consumers, and under no circumstances should
AMS destroy a highly successful economic structure. We highlight the
following overall concerns and general comments regarding AMS's
requests for comments in the ANPR:
AMS poses questions in the ANPR that presuppose the current
poultry grower contracting system is unfair or problematic. AMS
appears to have made up its mind without even considering
comments, and NCC urges AMS to take an unbiased approach to its
rulemaking, especially considering the impression presented in
the ANPR is far from accurate. Tellingly, no court has ruled
that the current grower compensation system violates Section
202(a) of the Packers and Stockyards Act, nor has AMS taken
enforcement action on this basis despite the tournament system
being in use for decades.
Several of AMS's questions for comment in the ANPR appear to
reflect ideas from earlier 2010 and 2015 rulemakings (75 Fed.
Reg. 35338 (June 22, 2010); 81 Fed. Reg. 92723 (Dec. 20, 2016))
that were clearly rejected by Congress.\18\ As multiple
economic impact studies submitted to those dockets reflect,
those proposals would have imposed costs on the industry in
excess of $1 billion (numbers that, due to inflation, would be
significantly higher in 2022). Those proposals were misguided
and costly when introduced and remain so today. To the extent
AMS seeks to incorporate ideas from those previous rulemakings
into future regulatory action, NCC urges the agency to account
for these independent economic analyses and inflation when
evaluating the costs on the industry and consumers.
---------------------------------------------------------------------------
\18\ See Consolidated and Further Continuing Appropriations Act,
2015, H.R. 83, 113th Cong. 731 (2014); Consolidated Appropriations
Act, 2014, H.R. 3547, 113th Cong. 744 (2014); Consolidated and
Further Continuing Appropriations Act, 2013, H.R. 933, 113th Cong.
742-43 (2013); Consolidated and Further Continuing Appropriations Act,
2012, H.R. 2112, 112th Cong. 721 (2011).
Existing market practices address or prevent many of the
purported concerns AMS raises. Dealers have every economic and
business incentive to promote the optimal growth of birds and
maintain productive relationships with their growers. Because
chicken processing plants are expensive and only provide
sufficient return on investment if they operate at full
capacity, dealers are further incentivized to maintain good
reputations as a good business partner in order to attract new
growers to their operation and maintain a consistent processing
schedule. Processors that gain a reputation as bad business
partners, including by attempts to manipulate a grower's
performance or otherwise drive away growers, would quickly see
their plants under-supplied and their grower pool taken by
competitors. Lenders serve as an additional check on dealer
business practices. Because many growers are financed by
experienced lenders, lenders are intimately involved in
scrutinizing the revenue expected under a growing arrangement,
and they have a sophisticated understanding of the industry.
Growers presented with unsustainable contracts would not be
able to secure financing, which in turn would mean dealers
would not have anyone to raise their birds. This provides a
natural market force to reinforce the existing economic
---------------------------------------------------------------------------
incentives toward fair and sustainable contracts.
AMS appears to be to be overly concerned with contract
termination. As explained in detail in Section I, dealers have
every inventive to help growers raise high quality birds and
meet their expectations under the contract. If there is a
concern about growers meeting their contracted-for standards,
dealers work with the growers and technical experts to address
the issue and identify areas of improvement. In reality, and as
explained above, less than one percent of contracts are
terminated each year. These terminations are most often for
animal welfare violations and failure to raise the birds
properly.
AMS should avoid any changes that eliminate the current
system's ability to reward the top-performing growers.
Eliminating performance-based pay would eliminate any incentive
for a grower to put in the hard work and make the necessary
investments to raise high-quality flocks. This would harm
efficiency, jeopardize bird welfare, make it harder for top
performers to stay in the poultry growing business, and
ultimately affect consumer prices. The current compensation
system structure is an efficient and an effective means of
rewarding the best growers for performing above average and
incentivizing less-efficient growers to improve their
performance.
IV. AMS Should Address All Amendments to PSA Regulations in One
Rulemaking Otherwise, All Changes Required of Industry Should
Have a Single Implementation Date
We urge the agency to propose and implement all planned amendments
to PSA regulations in a single rulemaking, or, if this is not possible,
provide a single implementation date. NCC is concerned that AMS is
taking a piecemeal approach to promulgating regulations for industries
regulated by the PSA. This ANPR and the proposed rule issued on the
same day as the ANPR signal AMS intends to propose a line of planned
changes affecting the poultry industry. Imposing constant regulatory
changes on industry would only foster confusion, increase unnecessary
costs, and impress uncertainty in an already uncertain economic
environment. Implementing changes in a single rulemaking would allow
industry to see the true cost of the proposed changes and allow AMS to
be transparent with industry about the direction it plans to take. Even
if AMS chooses to implement regulations in a piecemeal fashion, it
should implement a uniform effective date for all changes to PSA
regulations currently identified in the Unified Agenda, including
``Clarification of Scope of the Packers and Stockyards Act (AMS-FTPP-
21-0046)'' (RIN 0581-AE04) and ``Unfair Practices in Violation of the
Packers and Stockyards Act (AMS-FTPP-21-0045)'' (RIN 0581-AE05).
* * * * *
NCC appreciates the opportunity to comment on the ANPR. Please feel
free to contact us with any questions. Thank you for your
consideration.
Respectfully submitted,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mike Brown,
President,
National Chicken Council.
Exhibit 4: NCC Comments to Docket No. AMS-FTPP-21-0045 Inclusive
Competition and Market Integrity Under the PSA Proposed Rule (Jan. 17,
2023)
January 17, 2023
Submitted electronically via regulations.gov
Bruce Summers,
Administrator,
Agricultural Marketing Service,
United States Department of Agriculture
RE: Comments on Inclusive Competition and Market Integrity Under the
Packers and Stockyards Act, 87 Fed. Reg. 60010 (Oct. 3,
2022), Docket No. AMS-FTPP-21-0045
Dear Mr. Summers:
The National Chicken Council (NCC) appreciates the opportunity to
comment on the proposed rule, ``Inclusive Competition and Market
Integrity Under the Packers and Stockyards Act'' published in the
Federal Register on October 3, 2022, (the ``Proposed Rule'') by the
U.S. Department of Agriculture (USDA) Agricultural Marketing Service
(``AMS'' or the ``agency''). NCC represents vertically integrated
companies that produce and process more than 95 percent of the chicken
marketed in the United States. Our members would be directly affected
by the proposed regulations.
The Proposed Rule would fundamentally alter and constrain the
poultry production market to the detriment of growers, consumers, and
processors alike. The Proposed Rule suffers numerous legal infirmities
and would have devastating effects on the poultry contracting process,
resulting in increased costs to our members making it more difficult to
fairly reward their contract farmers. For the numerous reasons
discussed in these comments, we urge AMS to withdraw the Proposed Rule.
To the extent AMS believes a rulemaking remains necessary, we urge AMS
to promulgate a single rulemaking addressing all proposed changes to
livestock and poultry contracting in one consolidated process.
Executive Summary
NCC urges AMS to withdraw the Proposed Rule because it is legally
unsound, unworkable for industry, and poses costs that will inflict
irreparable damage to the U.S. economy. The Proposed Rule exceeds AMS's
statutory mandate by proposing a rule by which violations would
seemingly not require a showing of injury to competition, an essential
component of all violations of Section 202 of the Packers and
Stockyards Act (PSA). The Proposed Rule further fails to pass
constitutional muster because of the litany of vague and undefined
terms used throughout that fail to clearly define what conduct is
prohibited. The Proposed Rule likewise falls short of Administrative
Procedure Act (APA) requirements because it is based on an inadequate
administrative record. Moreover, each provision of the Proposed Rule
suffers fatal flaws making the proposal fundamentally unworkable. We
highlight specific concerns below, noting in particular the failure to
define and protect reasonable business conduct and the broad and
subjective definition of ``market vulnerable individual.'' Finally, AMS
drastically underestimates the cost of the Proposed Rule overlooking
the heavy costs of recordkeeping, contract revisions, and associated
labor and technology, much less the substantial litigation costs that
would be necessary to define the contours of the Proposed rule. For the
many reasons discussed below, AMS should withdraw the Proposed Rule. If
AMS continues to believe the proposal is necessary, it should conduct a
single rulemaking addressing all proposed changes to livestock and
poultry contracting.
I. The Proposed Rule Is Legally Deficient
The Proposed Rule is legally deficient because it would prohibit
conduct without regard to injury or likely injury to competition, is
unconstitutionally vague, exceeds AMS's statutory mandate, and is not
supported by the administrative record.
A. The Proposed Rule would prohibit conduct without regard to injury to
competition
Well established caselaw--universal among the many circuit courts
of appeal to have considered the issue--holds that establishing a
violation of Section 202 of the PSA requires showing injury or likely
injury to competition. As recently as 2 years ago, AMS tacitly
recognized this as well.\1\ AMS suggests throughout the preamble,
however, that it could enforce the Proposed Rule without showing
competitive injury.\2\ Meanwhile, the plain text of the Proposed Rule
is silent on the requirement. As a matter of law, all violations of
Sections 202(a) and (b) of the PSA require a showing of injury, or the
likelihood of injury, to competition. The Proposed Rule ignores this
requirement and attempts to reach much more broadly. As such, it would
exceed AMS's statutory authority.
---------------------------------------------------------------------------
\1\ Most recently, AMS recognized ``a question'' of competitive
injury in its 2020 rulemaking addressing criteria for identifying
violations of the PSA. 85 Fed. Reg. 79779, 79790 (Dec. 11, 2020)
(``Whether competitive injury is required to establish a violation of
the Act is a broader question applicable to the full provisions of
sections 202(a) and 202(b). . . .'').
\2\ For example, AMS references protecting individual producers
without addressing the corresponding need to show a broader injury or
likelihood of injury to competition:
The proposed prohibitions would protect producers at both
individual and market-wide lev-
els from undue prejudices and disadvantages and unjust
discrimination--both of which AMS
has determined violate the PSA. The Secretary is empowered under the
PSA to address harms
in their incipiency.
87 Fed. Reg. 60017. AMS cites Bowman v. USDA, to support the above
proposition, quoting ``the Act is designed to `prevent potential injury
by stopping unlawful practices in their incipiency. Proof of a
particular injury is not required.'' 363 F.2d 81, 85 (5th Cir. 1966)
(emphasis added). AMS ignores however that the concerns it identifies
do not in fact violate the PSA without showing a likelihood of
competitive injury. If an action, including one it its incipiency, does
not present a likelihood of injury to competition, it is not unlawful
under the PSA.
---------------------------------------------------------------------------
1. The agency lacks statutory authority to promulgate any regulation
that permits a finding of a violation of Sections 202(a) or (b)
of the PSA without a showing of injury to competition
When Congress passed the PSA, it specifically intended to prohibit
practices that harmed the competitive process. The language that it
used in the statute was understood at the time of enactment to address
those practices that were collusive or monopolistic (or monopsonistic)
and had a substantial likelihood of reducing output and ultimately
raising prices to consumers. Congress incorporated terminology from
other regulatory statutes--most notably, the Interstate Commerce Act
(ICA) and the Federal Trade Commission Act (FTCA)--that were plainly
designed to protect the competitive process for the benefit of the
consuming public. The competitive injury requirement, therefore, is not
some judicial gloss on Section 202(a)-(b) but an integral part of the
statutory scheme. By importing language from other enactments with
well-established legal meaning, Congress necessarily ``adopt[ed] the
cluster of ideas that were attached to each borrowed word in the body
of learning from which it was taken and the meaning its use
convey[ed].'' \3\ Accordingly, it is the statutory language itself that
imposes the requirement of competitive injury. Indeed, there is no
other reasonable reading of the statute. The agency has no authority to
promulgate any regulation that is broader than, or conflicts with, the
underlying statutory provision on which it is based.\4\ Because
Sections 202(a) and (b) of the PSA mandate a showing of competitive
injury, AMS has no power to read out that statutory element through its
rulemaking authority.
---------------------------------------------------------------------------
\3\ Morissette v. United States, 342 U.S. 246, 263 (1952).
\4\ Morrison v. National Australia Bank, Ltd., 130 S. Ct. 2869,
2881 (2010) (regulation promulgated under a statute `` `does not extend
beyond conduct encompassed by [the statute's] prohibition' '') (quoting
United States v. O'Hagan, 521 U.S. 642, 651 (1997)); Ernst & Ernst v.
Hochfelder, 425 U.S. 185, 214 (1975) (``scope [of a rule] cannot exceed
the power granted the [agency] by Congress under [the relevant
statute]'').
---------------------------------------------------------------------------
The PSA is at its foundation an antitrust law. There is no dispute
that the purpose of Section 202 of the PSA is the elimination of
monopolistic or other anticompetitive practices--that is, to protect
competition for the benefit of consumers. Only a year after the Act's
passage, the Supreme Court in Stafford v. Wallace recognized that the
``chief evil'' that Section 202 sought to address was ``the monopoly of
the packers, enabling them unduly and arbitrarily to lower prices to
the shipper, who sells, and unduly and arbitrarily to increase the
price to the consumer, who buys.'' \5\ ``Another evil,'' according to
the Court, was ``exorbitant charges, duplication of commissions,
deceptive practices in respect of prices, in the passage of the live
stock through the stockyards, all made possible by collusion between
the stockyards management and the commission men, on the one hand, and
the packers and dealers, on the other.'' \6\
---------------------------------------------------------------------------
\5\ Stafford v. Wallace, 258 U.S. 495, 514-15 (1922) (emphasis
added).
\6\ Id. (emphasis added).
---------------------------------------------------------------------------
The common thread linking the statutory purposes identified by the
Supreme Court is the elimination of anticompetitive practices. First,
as the Stafford Court noted, Congress sought to prohibit the abuse
``unduly and arbitrarily'' of monopsony power by packers that leads to
a monopolistic restriction of output with the effect of ``arbitrarily''
increasing the price of products purchased by consumers. Second,
Congress intended to prevent ``exorbitant charges'' and other
anticompetitive practices resulting from collusion among market
participants. As the Court noted, because of that collusion,
``[e]xpenses incurred in the passage through the stockyards necessarily
reduce the price received by the shipper, and increase the price to be
paid by the consumer.'' \7\ In other words, every aim of Section 202
identified in Stafford manifests an intent to protect the competitive
process for the benefit of consumers.
---------------------------------------------------------------------------
\7\ Stafford, 258 U.S. at 515.
---------------------------------------------------------------------------
Nothing in Stafford or in the language of the statute suggests that
Congress intended the Act to protect individual market participants
from the stringency of competition. Rather, market participants are
protected from conduct that itself would have the effect of harming
competition and consumer interests. In identifying the aims of Section
202, Stafford explicitly connects any protection of producers to the
protection of consumers. The Court explained that Congress sought to
remove ``undue burden[s] on . . . commerce'' \8\ and ``unjust
obstruction[s] to . . . commerce'' \9\ flowing from any ``unjust or
deceptive practice or combination,'' confirming that Congress enacted
the PSA to maximize market output for the benefit of consumers.
---------------------------------------------------------------------------
\8\ Id.
\9\ Id.
---------------------------------------------------------------------------
Courts have long recognized that the PSA is rooted in antitrust
law.\10\ Antitrust law exists to protect the competitive process so
that consumers may obtain the highest quality goods and services at the
lowest possible cost.\11\ In the absence of some likely consumer harm,
``[e]ven an act of pure malice by one business competitor against
another does not, without more, state a claim under the Federal
antitrust laws.'' \12\ In short, the Sherman Act and other antitrust
statutes have not been construed to protect producers from the rigors
of competition or to strike against aggressively competitive practices.
Instead, these laws aim to enhance consumer welfare by ensuring that
markets operate efficiently and that products are produced and priced
competitively. Stafford makes clear that the goals of the PSA are
identical.\13\
---------------------------------------------------------------------------
\10\ De Jong Packing Co. v. United States Dep't of Agric., 618 F.2d
1329, 1335 n. 7 (9th Cir.), cert. denied, 449 U.S. 1061 (1980) (PSA
``incorporates the basic antitrust blueprint of the Sherman Act and
other pre-existing antitrust legislation''); Armour & Co. v. United
States, 402 F.2d 712, 722 (7th Cir. 1968) (``Congress gave the
Secretary no mandate to ignore the general outline of long-time
antitrust policy by condemning practices which are neither deceptive
nor injurious to competition nor intended to be so by the party
charged.'').
\11\ See, e.g., Brooke Group Ltd. v. Brown & Williamson Tobacco
Corp., 509 U.S. 209, 225 (1993) (the antitrust laws protect
``competition, not competitors'') (emphasis in original) (quoting Brown
Shoe Co. v. United States, 370 U.S. 294, 320 (1962)); Reiter v.
Sonotone Corp., 442 U.S. 330, 343 (1979) (``Congress designed the
Sherman Act as a `consumer welfare prescription' '') (quoting R. Bork,
The Antitrust Paradox 66 (1978)); Sanderson v. Culligan Int'l Co., 415
F.3d 620, 623 (7th Cir. 2005) (``The antitrust laws protect consumers,
not producers. They favor competition of all kinds, whether or not some
other producer thinks the competition `fair.' ''); Freeman v. San Diego
Ass'n of Realtors, 322 F.3d 1133, 1154 (9th Cir. 2003) (``Inefficiency
is precisely what the market aims to weed out. The Sherman Act, to put
it bluntly, contemplates some roadkill on the turnpike to
Efficiencyville.''); Chicago Prof'l Sports Ltd. P'ship v. National
Basketball Ass'n, 95 F.3d 593, 597 (7th Cir. 1996) (``The core question
in antitrust is output. Unless a contract reduces output in some
market, to the detriment of consumers, there is no antitrust
problem.'').
\12\ Brooke Group, 509 U.S. at 225.
\13\ The PSA may be broader than some antitrust provisions in that
it prohibits acts that are likely to have a detrimental effect on
competition rather than only those having an actual anticompetitive
effect. See, e.g., De Jong, 618 F.2d at 1335 n. 7 (``the courts that
have considered 202 have consistently looked to decisions under the
Sherman Act for guidance, although recognizing that 202 in some cases
proscribes practices which the Sherman Act would permit''); Armour &
Co., 412 F.2d at 722 (``While Section 202(a) of the Packers and
Stockyards Act may be broader than antecedent antitrust legislation
found in the Sherman Act, Clayton Act, FTCA and ICA, there is no
showing that there was any intent to give the Secretary of Agriculture
complete and unbridled discretion to regulate the operations of
packers.''). The point remains, however, that Section 202 does not
permit either the agency or a private plaintiff to dispense with some
showing of competitive injury--actual or likely--to prove a violation.
---------------------------------------------------------------------------
2. Every appellate court to have considered the issue has held Section
202 of the PSA requires a showing of competitive injury
In light of Stafford, every appellate court to have construed
Section 202 of the PSA has held that no violation of subsections (a) or
(b) occurs without a showing of competitive injury. Eight different
circuits have addressed the issue, and they have uniformly and
resoundingly affirmed this understanding.\14\ In several of these
cases, the agency argued its position directly to the court in
question; \15\ in others, it filed amicus briefs urging the court to
adopt its preferred construction.\16\
---------------------------------------------------------------------------
\14\ Terry v. Tyson Farms, Inc., 604 F.3d 272, 276-79 (6th Cir.
2010); Wheeler v. Pilgrim's Pride Corp., 591 F.3d 355 (5th Cir. 2009)
(en banc); Been v. O.K. Indus., Inc., 495 F.3d 1217, 1230 (10th Cir.
2007); Pickett v. Tyson Fresh Meats, Inc., 420 F.3d 1272, 1280 (11th
Cir. 2005), cert. denied, 547 U.S. 1040 (2006); London v. Fieldale
Farms Corp., 410 F.3d 1295, 1303 (11th Cir.), cert. denied, 546 U.S.
1034 (2005); IBP, Inc. v. Glickman, 187 F.3d 974, 977 (8th Cir. 1999);
Philson v. Goldsboro Milling Co., 1998 WL 709324 at *4-5 (4th Cir.,
Oct. 5, 1998); Jackson v. Swift Eckrich, Inc., 53 F.3d 1452, 1458 (8th
Cir. 1995); Farrow v. United States Dep't of Agric., 760 F.2d 211, 215
(8th Cir. 1985); De Jong, 618 F.2d at 1336-37; Pac. Trading Co. v.
Wilson & Co., 547 F.2d 367, 369-70 (7th Cir. 1976); see also Armour &
Co., 402 F.2d 712.
\15\ IBP, 187 F.3d 974; Farrow, 760 F.2d 211; De Jong, 618 F.2d
1329; Armour & Co., 402 F.2d 712.
\16\ Terry, 604 F.3d 272; Wheeler, 591 F.3d 355.
---------------------------------------------------------------------------
The Sixth Circuit thoroughly summed up the judicial landscape in
its 2010 Terry decision. The court concluded that, while the question
of ``whether a plaintiff asserting unfair discriminatory practices or
undue preferences under 202(a) and (b) of the PSA must allege an
adverse effect on competition to state a claim'' was new to the Sixth
Circuit, other courts had addressed the question:
This issue is not novel to other courts; it has been
addressed by seven of our sister circuits, with consonant
results. All of these courts of appeals unanimously agree that
an anticompetitive effect is necessary for an actionable claim
under subsections (a) and (b). For the reasons that follow, we
join this legion.\17\
---------------------------------------------------------------------------
\17\ Terry, 604 F.3d at 276.
In surveying court precedent, the Sixth Circuit noted the
``prevailing tide'' of circuit court decisions holding ``that
subsections (a) and (b) of 192 [PSA 202] require an anticompetitive
---------------------------------------------------------------------------
effect,'' after which it concluded:
The tide has now become a tidal wave, with the recent
issuance of the Fifth Circuit Court of Appeals' en banc
decision in Wheeler v. Pilgrim's Pride Corp., 591 F.3d 355 (5th
Cir. 2009) (en banc), in which that court joined the ranks of
all other Federal appellate courts that have addressed this
precise issue when it held that ``the purpose of the Packers
and Stockyards Act of 1921 is to protect competition and,
therefore, only those practices that will likely affect
competition adversely violate the Act.'' Wheeler, 591 F.3d at
357. All told, seven circuits--the Fourth, Fifth, Seventh,
Eighth, Ninth, Tenth, and Eleventh Circuits--have now weighed
in on this issue, with unanimous results.\18\
---------------------------------------------------------------------------
\18\ Id. at 277 (lengthy string citation of supporting cases
omitted).
Tellingly, USDA participated in the Terry appeal as an amicus
curiae and advanced the position that a showing of injury is not
required for a Section 202(a) or (b) violation. The court expressly
recognized USDA's involvement, noted USDA's argument that the court
should read Section 202(a) and (b) to not require a showing of injury
to competition, and pointedly concluded, ``We decline to do so.'' \19\
---------------------------------------------------------------------------
\19\ Id. at 278.
---------------------------------------------------------------------------
The agency offers no analysis undermining any of these court
decisions, nor could it. The agency has participated in some capacity,
either as a party or an amicus, in six of the ten appellate cases
holding that competitive injury is an element of a Section 202
violation. In light of this record of litigation futility, AMS is not
free to ignore the prevailing judicial authority or seek to undo it
through the rulemaking process.
3. When the PSA was enacted, the language of Sections 202(a) and (b)
was understood to proscribe conduct that harmed competition
AMS blindly ignores the competitive injury requirement in Section
202, instead implying the language of the section is malleable and open
to interpretation. Rather than base this argument on any legal
authority, AMS dredges up contemporaneous dictionary definitions of the
terms and then seeks to impress them on the statute's language.\20\ The
agency cites no authority for this proposed form of statutory
construction, which borders on frivolous. In exercising its rulemaking
authority, AMS must follow the canons of statutory interpretation. It
is neither ``free to pour a vintage that [it] think[s] better suits
present-day tastes'' \21\ nor otherwise permitted to construe a statute
in a linguistic vacuum. The APA does not sanction such ``make-it-up-as-
the-agency goes-a-long'' exercises of regulatory power.
---------------------------------------------------------------------------
\20\ 87 Fed. Reg. 60015-16.
\21\ United States v. Sisson, 399 U.S. 267, 297 (1970).
---------------------------------------------------------------------------
The relevant provisions of the Act prohibit ``unfair,'' ``unjustly
discriminatory,'' and ``deceptive'' practices and devices, as well as
``undue'' or ``unreasonable'' preferences and advantages and ``undue''
or ``unreasonable'' prejudices and disadvantages. All of these terms
had established statutory and common-law antecedents that were well-
known to Members of Congress when the statute was enacted. Read in
legal context, these terms concern only business conduct that has an
actual or likely adverse effect on competition.\22\ Therefore, the
interpretation given by the courts to Sections 202(a) and (b) is not
merely the best reading but rather is the only permissible reading of
the statute.
---------------------------------------------------------------------------
\22\ Wheeler, 591 F.3d at 364 (Jones, J., concurring). The term
``unreasonable,'' for example, had a clear antitrust meaning by the
time of the passage of the PSA. The Supreme Court had used that
terminology to distinguish between those business practices that
unlawfully restrained competition from those that were permissible
under the Sherman Act. See, e.g., Chicago Bd. of Trade v. United
States, 246 U.S. 231 (1918); Standard Oil Co. v. United States, 221
U.S. 1 (1911).
---------------------------------------------------------------------------
The language of Sections 202(a) and (b) is lifted almost verbatim
from provisions of the ICA and the FTCA.\23\ By the time of the PSA's
passage in 1921, these statutes had been addressed a number of times by
the Supreme Court. There was no question at the time that the aims of
those laws were to preserve or restore competition and prevent
monopolistic practices either generally, in the case of the FTCA, or in
specific economic sectors, in the case of the ICA.\24\ The language
used in those enactments was understood to effectuate those
Congressional goals.
---------------------------------------------------------------------------
\23\ 81 Fed. Reg. at 92570.
\24\ See generally Wheeler, 591 F.3d at 365-70 (Jones, J.
concurring) (collecting cases).
---------------------------------------------------------------------------
Words used in a statute that ``have acquired a specialized meaning
in the legal context must be accorded their legal meaning.'' \25\ When
Congress transports phrases from one statute to another, there is a
strong presumption that adoption of such terminology ``carries with it
the previous judicial interpretations of the wording.'' \26\ Moreover,
Congress ``presumably knows and adopts the cluster of ideas that were
attached to each borrowed word in the body of learning from which it
was taken and the meaning its use will convey to the judicial mind
unless otherwise instructed.'' \27\ ``[I]f a word is obviously
transplanted from another legal source, whether the common law or other
legislation, it brings its soil with it.'' \28\ Here, nothing in
Sections 202(a) and (b) of the PSA suggests that Congress intended the
words used in those provisions to have a meaning different from the
meaning given them in other statutes.\29\ Rather, Congress used terms
of art to describe the unlawful practices prohibited by Sections 202(a)
and (b). The ``plain language'' rule requires that those terms of art
be given their commonly understood meaning at the time of the PSA's
passage. Accordingly, the statutory language itself requires that
either the agency or a private plaintiff prove a competitive injury to
show a violation of Sections 202(a) and (b).
---------------------------------------------------------------------------
\25\ Buckhannon Bd. & Care Home, Inc. v. West Va. Dep't of Health &
Human Resources, 532 U.S. 598, 615 (2001) (emphasis in original).
\26\ Carolene Prods. Co. v. United States, 323 U.S. 18, 26 (1944).
\27\ Morissette, 342 U.S. at 263.
\28\ Moskal v. United States, 498 U.S. 103, 121 (1990) (quoting F.
Frankfurter, Some Reflections on the Reading of Statutes, 47 Colum.
L.R. 527, 537 (1947)).
\29\ Although resort to the legislative history of the PSA is
unnecessary for a proper construction of Sections 202(a) and (b), that
legislative history also confirms that Congress understood the terms
used in the statute to address anticompetitive conduct. See H.R. Rep.
No. 67-77, at 2-10 (1921) (detailed discussion of Supreme Court cases
construing the language of the ICA and the FTCA).
---------------------------------------------------------------------------
4. The structure of Section 202 of the PSA mandates a competitive
injury requirement
The existence of a competitive injury requirement is also manifest
from the structure of the statute. Sections 202(a) and (b) do not ban
all forms of economic discrimination, preference, or advantage. Rather,
they prohibit only those that are ``unjust,'' ``undue,'' ``unfair'' or
``unreasonable.'' Therefore, there must be some forms of
discrimination, preference or advantage that are legitimate and some
that are not. Both the courts and the agency must have an objective
standard by which to distinguish lawful conduct from unlawful conduct.
The explicit requirement of competitive injury in other subsections of
Sections 202 demonstrate precisely what Congress intended that
objective standard to be. When examined in context, the only reasonable
conclusion that can be drawn is that Sections 202(a) and (b) are
intended to be catch-all provisions that sweep up anticompetitive
practices not otherwise prohibited by the more narrowly drawn
subsections of the statute.\30\ Otherwise, Sections 202(a) and (b)
would prohibit activities specifically exempted from the other Section
202 subsections, depriving those sections of any meaning and rendering
them null, contrary to the canons of interpretation.
---------------------------------------------------------------------------
\30\ Wheeler, 591 F.3d at 371 (Jones, J., concurring).
---------------------------------------------------------------------------
Without the competitive injury requirement, there is no objective
standard by which courts, or the agency, can separate prohibited
practices from lawful ones. Cut loose from their moorings in
competition law, the terms ``discrimination,'' ``preference'' and
``advantage'' would have broad meanings that extend well beyond the
economic realm. Yet, even AMS has not suggested that the PSA applies to
noncommercial practices. The agency's own understanding of the statute,
therefore, confirms that Congress intended the PSA to be economic
legislation governing commercial relationships. Once that fact is
recognized, it follows that the terms ``unfair,'' ``unjust,'' ``undue''
and ``unreasonable'' must also have economic content. The only way to
give those terms such content is to apply a clear set of objective
economic principles that allow a court or agency to ferret out those
practices that are harmful--that is, ``unfair,'' ``unjust,'' ``undue,''
or ``unreasonable''--from those that are efficient and beneficial to
competition overall based on the legal definitions of these terms when
the PSA was adopted. The competitive injury requirement, in turn, is
the only way to do so consistent with the structure and purposes of
Section 202.
Any other interpretation would make it virtually impossible for a
business subject to the PSA to order its affairs rationally to comply
with Section 202(a) or (b). What is ``unfair,'' ``unjust,'' ``undue,''
or ``unreasonable'' would depend solely on what an agency adjudicator
or, in civil litigation, a judge or jury decided that it meant in any
particular case. To exercise that function, the agency or court would
have to make value judgments, choosing one set of priorities over
another without any guidance from the statutory text or any other
source about which value or set of values is to be preferred in any
particular case. Such an approach raises significant constitutional
issues, but in any event, there is no need to address those matters
because nothing in the statutory text suggests Congress intended to
empower the agency or the courts to make such standardless value
judgments.\31\
---------------------------------------------------------------------------
\31\ Id. at 365 (Jones, J., concurring) (PSA ``certainly did not
delegate any such free value-choosing role to the courts'') (quoting R.
Bork, The Antitrust Paradox 53 (1993 ed.)).
---------------------------------------------------------------------------
In sum, the plain language of Section 202 of the PSA, its aims, and
its structure reveal that Congress intended that the practices banned
by subsections (a) and (b) be those that harm competition in some
fashion. That conclusion has been unanimously confirmed by every
appellate court to address the issue. Therefore, the competitive injury
requirement is not merely some gloss on an allegedly ambiguous
provision but an integral and permanent statutory command.
5. Any effort to omit the PSA's competitive injury requirement exceeds
AMS's statutory mandate and raises a major question requiring
Congressional direction
Congress has not authorized AMS to forego the competitive injury
requirement of Section 202. The Proposed Rule ultimately stems from
rulemaking driven by the 2008 Farm Bill.\32\ The 2008 Farm Bill granted
no authority to AMS to promulgate a rule that excuses the competitive
injury requirement of Section 202(a) or (b). Section 11006 of the 2008
Farm Bill stated in pertinent part that the ``Secretary of Agriculture
shall promulgate regulations with respect to the Packers and Stockyards
Act, 1921 (7 U.S.C. 181 et seq.) to establish criteria that the
Secretary will consider in determining whether an undue or unreasonable
preference or advantage has occurred in violation of such Act.'' \33\
The farm bill, therefore, authorized only a rule setting forth criteria
that the agency would use in determining whether a violation of Section
202(b) of the PSA has occurred. It did not authorize AMS to alter,
abrogate, or ignore the fundamental elements of the statute.
---------------------------------------------------------------------------
\32\ Pub. L. 100-246.
\33\ Id. 11006(1).
---------------------------------------------------------------------------
Not only did the plain language of the 2008 Farm Bill make that
clear, but the legislative record unmistakably demonstrates that
Congress authorized no radical alteration of Sections 202(a) or (b).
The original draft of the 2008 Farm Bill proposed by Senator Harkin
contained an express provision eliminating the competitive injury
requirement under Sections 202(a) and (b). Congress removed that
language from the final enactment. Accordingly, the 2008 Farm Bill did
not authorize AMS to forego the competitive injury element of Section
202 violations.
When AMS's predecessor agency charged with PSA implementation, the
Grain Inspection, Packer and Stockyards Administration (GIPSA),
nonetheless tried to read into the 2008 Farm Bill a mandate to
circumvent the injury to competition requirement, Congress reacted
swiftly and clearly by preventing GIPSA from finalizing an overly broad
rulemaking for several years.\34\ Moreover, the 2014 and 2018 Farm
Bills did not renew the call for criteria, nor did they make any
reference to GIPSA's 2010 rulemaking that had started--and then had
been halted by Congress--in response to the 2008 Farm Bill. And they
certainly did not indicate Congress supported attempts to read the
injury to competition requirement out of the PSA. Had Congress intended
for the agency to reinterpret Sections 202(a) and (b), Congress readily
could have clarified as much in the 2014 or 2018 Farm Bill, especially
in light of the considerable controversy caused by GIPSA's 2010
proposed rule. Instead, the 2014 and 2018 Farm Bills were silent on the
topic, suggesting, if anything, that Congress felt it was time to move
on from the issue raised in that rulemaking. When GIPSA ultimately
promulgated an appropriately tailored rulemaking, resulting in 9 CFR
201.211, Congress did not object.
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\34\ See Consolidated and Further Continuing Appropriations Act,
2015, H.R. 83, 113th Cong. 731 (2014); Consolidated Appropriations
Act, 2014, H.R. 3547, 113th Cong. 744 (2014); Consolidated and
Further Continuing Appropriations Act, 2013, H.R. 933, 113th Cong.
742-43 (2013); Consolidated and Further Continuing Appropriations Act,
2012, H.R. 2112, 112th Cong. 721 (2011).
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Given this clear direction from Congress, AMS's attempt to read the
injury to competition requirement out of the PSA and to effectively
expand the PSA into a general anti-discrimination law raises a major
question requiring Congressional direction. As such, AMS may not expand
its regulatory framework to change or undermine the current application
of Sections 202(a) and (b). As recently stated by the Supreme Court in
West Virginia v. EPA, in certain cases of ``economic and political
significance,'' an agency must demonstrate ``clear Congressional
authorization'' to exercise its powers.\35\ The PSA is a hundred-year-
old law, and at no point in its history has it been applied to broadly
address the type of conduct encompassed in the Proposed Rule or to
prohibit conduct that does not result in an injury or the likelihood of
injury to competition. Congress knows what the PSA does and does not
do, and only Congress may expand the law's reach to cover new conduct.
Through the present series of rulemakings, of which this Proposed Rule
is a part, AMS seeks to completely upend animal production contracting
in the livestock and poultry industry. These sectors account for more
than $1 trillion of annual economic impact and touch all fifty states,
and they would be drastically affected by a change in the injury to
competition requirement. Any attempt to rewrite by regulation the PSA's
injury to competition requirement is the very definition of an issue of
``economic and political significance.'' AMS cannot take it upon itself
to dramatically expand the scope of such a longstanding statute.
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\35\ 142 S. Ct. 2587, 2613-14 (2022) (explaining that in certain
cases of ``economic and political significance,'' an agency must
demonstrate ``clear Congressional authorization'' to exercise its
powers); see also Nat'l Fed'n of Ind. Business v. OSHA, 142 S. Ct. 661
(2022) (per curiam) (rejecting the Occupational Safety and Health
Administration's claims of regulatory authority regarding emergency
temporary standards imposing COVID-19 vaccination and testing
requirements on a large portion of the national workforce); Ala. Ass'n
of Realtors v. HHS, 141 S. Ct. 2485 (2021) (per curiam) (rejecting the
Centers for Disease Control and Prevention's claims of regulatory
authority regarding a nationwide eviction moratorium).
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B. The Proposed Rule is unconstitutionally vague
A regulation having the force of law must give persons and entities
subject to it fair notice of what is prohibited so that they may comply
with it. Several portions of the Proposed Rule fail this basic
constitutional test. Under the due process clause of the Fifth
Amendment, a rule of law must define a legal violation ``with
sufficient definiteness that ordinary people can understand what
conduct is prohibited
and . . . in a manner that does not encourage arbitrary and
discriminatory enforcement.'' \36\ Any legal rule failing to meet that
standard is ``void for vagueness.'' While the vagueness doctrine is
most often employed in criminal cases, it has also been applied in
cases in which a party faced civil sanctions as well.\37\
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\36\ Skilling v. United States, 130 S. Ct. 2896, 2927-28 (2010).
\37\ Gentile v. State Bar, 501 U.S. 1030, 1048-50 (1991)
(invalidating state bar disciplinary rule under the void-for-vagueness
doctrine).
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The Supreme Court has applied the void-for-vagueness doctrine to
strike down economic regulations that are remarkably similar to the
Proposed Rule. In Cline v. Frink Dairy Co.,\38\ the Court held
unconstitutional under the Fourteenth Amendment Due Process Clause a
Colorado antitrust statute prohibiting certain business combinations
except those that were necessary to obtain a ``reasonable profit.''
Similarly, in United States v. L. Cohen Grocery Co.,\39\ the Court held
unconstitutional Section 4 of the Lever Act, which made unlawful any
``unjust or unreasonable rate or charge'' for ``necessities.'' And in
International Harvester Co. v. Kentucky,\40\ the Court concluded that a
Kentucky antitrust statute proscribing the fixing of prices at levels
``greater or less than the real value of the article'' was
unconstitutionally vague. The fatal flaw in each law was the
indeterminate liability standard imposed. None of the statutes
proscribed any specific conduct but rather made illegality turn on
``elements . . . [that] are uncertain both in nature and degree of
effect to the acutest commercial mind.'' \41\
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\38\ 274 U.S. 445, 453-65 (1927).
\39\ 255 U.S. 81 (1921).
\40\ 234 U.S. 216 (1914).
\41\ Id. at 223.
---------------------------------------------------------------------------
The Proposed Rule includes many vaguely or even undefined terms,
but failure to comply with those terms would result in a regulatory
violation. For example, ``market vulnerable individual'' would be
defined so broadly as to include potentially anyone. It is unclear how
to determine whether a contract is ``generally or ordinarily offered,''
when ``differential contract performance or enforcement'' would be
considered to have occurred, or what it means to ``inhibit market
access,'' ``take an adverse action,'' or use a ``pretext.'' The
Proposed Rule would prohibit conduct that is deemed to be a ``prejudice
or disadvantage'' or ``retaliation,'' \42\ but the proposal provides
only examples, not definitive lists or definitions, making it
impossible for a company to know whether any given conduct would be
allowed under the regulation. Because these provisions purport to
identify conduct that would be violative or specific records that would
need to be kept to demonstrate compliance, they must be spelled out in
a definite manner so that regulated entities can understand how to
comply with the Proposed Rule. The proposal would likewise prohibit
``pretexts'' without elaborating on what is a pretext and what is a
legitimate explanation, or even how ``legitimacy'' might be
determined.\43\ The proposal would impose a strict recordkeeping
requirement without specifying what records must be kept or, again,
what conduct would even trigger the recordkeeping requirements.\44\
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\42\ Proposed 201.304(a)(2), 201.304(b)(3).
\43\ Proposed 201.306(b)-(d).
\44\ Proposed 201.304(c)(2).
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These criteria provide virtually no guidance on when conduct would
be unlawful. Rather, an act could be determined to be unlawful under
the Proposed Rule only after some event has occurred. A poultry dealer
or other entity subject to Sections 202(a) and (b) acting in utmost
good faith and ordering its affairs in the most rational fashion in an
effort to comply with the Proposed Rule could not reasonably
anticipate, much less determine with any reasonable degree of
certainty, what business practices would ultimately be held illegal
under these and other provisions. The Proposed Rule, therefore, cannot
withstand constitutional scrutiny. It must be withdrawn.
C. An insufficient administrative record fails to support the Proposed
Rule
The Proposed Rule is a solution in search of a problem, as
evidenced by an insufficient administrative record. Perpetuating a
fatal flaw that has plagued rulemaking on this topic for thirteen
years, AMS fails to identify any actual harmful conduct requiring this
regulation. Yet it would impose substantial cost and administrative
burden on the entire poultry production industry with no tangible
benefit.
The preamble to the Proposed Rule is littered with vague allusions
to potentially violative conduct and generalized complaints lacking
sufficient detail for meaningful evaluation. AMS has certainly shown no
systemic or endemic problem in poultry contracting requiring such an
extreme intervention to correct. The agency's rationale repeatedly
falls back on broad conclusory statements or incomplete market
analysis. For example, in describing the perceived need for market
vulnerable individual provisions, AMS can state only that certain
groups ``arguably'' are exposed to risk of abuse and that
``undoubtedly'' the type of discrimination contemplated in the Proposed
Rule exists ``in some form today,'' without citing a single actual
example of this occurring.\45\ More broadly, the entire rulemaking
seems to simply presume there are widespread ``market abuses observed
in the sector today'' without actually identifying any instances in
which this particular set of regulations would be needed.\46\
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\45\ 87 Fed. Reg. at 60013.
\46\ Id.
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The preamble is heavy on economic theory and light on actual facts
to support the rulemaking. Stripped to its essence, the factual
administrative record to support this rulemaking consists of references
to unspecified allegations of unfair treatment by producers, a highly
selected set of court cases, and similar past rulemakings that never
came to fruition. None of these are sufficient to establish the need
for such an untenable set of regulations. The preamble is rife with
vague references of ``concerns'' that have been ``reported to USDA''
but never acted on.\47\ AMS provides no details about these purported
complaints, including what specifically they alleged happened, when
they were lodged, whether they were substantiated, how AMS investigated
or responded to them, what conclusions AMS reached, or even how many
AMS has received. The long history of rulemaking on this topic has been
peppered with allusions to thinly described complaints, but never has
AMS provided any real detail. If the unspecified ``concerns . . .
reported to USDA'' reflected PSA violations, why did USDA not
investigate them and take enforcement action under the statute?
Tellingly, AMS's response to this question in the preamble is
essentially that AMS did not think it had statutory authority to do so.
At the least, USDA might have developed a factual record to inform
policy decisions. Instead, it appears USDA was content to simply assume
these vague allegations were true. Moreover, many of these vague
allegations seem to have come from a 2010 listening session,\48\ and
some even earlier.\49\ They are long out of date and have never been
verified or subjected to the searching scrutiny warranted to support
Federal rulemaking. Unsubstantiated complaints lodged in 2010 and 2004
cannot meaningfully support a 2022 rulemaking under vastly different
economic conditions.
---------------------------------------------------------------------------
\47\ Id.
\48\ Id.
\49\ Id. at 60013 n. 32.
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The only concrete examples of alleged PSA violations in the entire
proposal come in the form of selected court cases. However, many of
these cases do not actually stand for the proposition for which they
are cited, and they appear to have been opportunistically selected and
used.
For example, AMS cites Swift & Co. v. United States \50\ for the
proposition that ``price discrimination in favor of a larger grocery
store chain, and higher prices to its competitors, are another type of
unjust discrimination that the Act has prevented.'' \51\ However, AMS
neglects to mention that in Swift, a prerequisite of the holding was a
finding that there was substantial evidence of injury to
competition.\52\ Similarly, AMS's reliance on Denver Union Stock Yard
Co. is misplaced because in that case, the Supreme Court specifically
addressed the discrimination at issue in the context of marketplace
harm, explaining that ``[a]s written [the PSA] is aimed at all monopoly
practices.'' \53\ AMS cites to the Terry decision described above to
support AMS's position that discriminatory or retaliatory acts by
packers or integrators intended to prevent transfer of rents negatively
affects efficiency, but in Terry, the Sixth Circuit actually held there
was no PSA violation because the plaintiff could not point to a
competitive injury.\54\ AMS similarly misconstrues the James case. AMS
describes the James case as standing for the proposition that ``fifty-
four poultry growers sued the integrator for retaliatory actions and
were awarded $10 million in damages as a result.'' \55\ But in fact, in
James, the Supreme Court of Oklahoma reviewed evidentiary proceedings
from the trial that AMS referenced, overturned the verdict, and granted
defendants a new trial citing concerns with the conduct of the
trial.\56\ Similarly, AMS cites Philson v. Cold Creek Farms, Inc. for
the proposition that skipping placements and terminating contracts with
turkey growers allegedly in retaliation for growers voicing complaints
about the integrator.\57\ Yet Philson was a ruling on the defendants'
motion for summary judgment and thus focused on the sufficiency of the
factual record. Importantly, in denying defendants' motion to dismiss
with respect to alleged PSA violations, the court noted Stafford's
emphasis that the PSA was fundamentally focused on preventing
monopolistic practices and concluded that ``[c]onsequently, only those
unfair, discriminatory or deceptive practices adversely affecting
competition are prohibited by the Act.'' \58\ The Philson court
expressly rooted its denial of the defendants' motion in findings that
triable issues of fact remained as to whether the complained-of conduct
caused injury to competition.\59\
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\50\ 317 F.2d 53, 55-56 (7th Cir. 1963).
\51\ 87 Fed. Reg. at 60016.
\52\ 317 F.2d at 55.
\53\ Denver Union Stock Yard Co. v. Producers Livestock Mktg., 356
U.S. 282, 289-90 (1958).
\54\ Terry v. Tyson Farms, Inc., 604 F.3d 272 (6th Cir. 2010).
\55\ 87 Fed. Reg. at 60026.
\56\ James v. Tyson Foods, Inc., 292 P.3d 10, 18-19 (Okla., 2012).
\57\ 87 Fed. Reg. at 60028.
\58\ Philson v. Cold Creek Farms, Inc., 947 F. Supp. 197, 200-02
(E.D.N.C. 1996).
\59\ E.g., id. at 201-02 (``In addition, a genuine issue of
material fact remains as to whether [Defendant's] method of computing
`head sold' was injurious to competition and unfair, discriminatory or
deceptive.'').
---------------------------------------------------------------------------
But even if one were to overlook the actual holdings of these cases
and take AMS's explanations at face value, these cases suggest that
actual serious PSA violations are rare--AMS cites only a handful of
cases over more than half a century--and that when they do occur, the
PSA provides USDA or harmed individuals with ample statutory authority
to pursue them. If anything, these cases show that the current
regulatory approach is working. They certainly do not support
additional, burdensome rulemaking. Likewise, poultry growing contracts
are also subject to state contract and tort law, and one would expect
extensive state-law litigation if integrators were engaging in abusive
contracting practices. That has not happened, again reinforcing that
the purported evils AMS is trying to address simply do not exist.
Finally, AMS recounts some of USDA's past PSA rulemaking efforts,
seeming to imply that because USDA decided to initiate rulemaking in
the past, there must a problem that requires solving. But a Federal
agency cannot simply conjure a problem into existence by saying it
tried to address that problem in the past, nor does the fact that
rulemaking occurred legitimize that administrative record. As discussed
above, Congress specifically objected to many aspects of those past
rulemakings, and the rules were withdrawn.
In short, nothing in the record indicates there is pervasive, or
even occasional, discrimination, retaliation, or deception of the type
raised in the Proposed Rule, much less that a burdensome series of
contracting restrictions, compliance hoops to jump through, and
recordkeeping obligations is justified to address it. This flawed
administrative record renders the Proposed Rule arbitrary and
capricious under the APA.\60\
---------------------------------------------------------------------------
\60\ 5 U.S.C. 706(2)(A).
---------------------------------------------------------------------------
II. The Proposed Rule Is Fundamentally Flawed and Unworkable
The Proposed Rule would do much harm and little if any good for
anyone involved. It suffers from several critical overarching flaws, as
well as flaws specific to each provision.
A. The Proposed Rule fails to expressly protect and define reasonable
business conduct
First, the regulatory text of the Proposed Rule fails to address
legitimate or reasonable business decisions. The reality of business
dealings means that in many cases two parties will be treated
differently simply because of economic conditions or business
realities. One grower might be offered a contract whereas another was
not simply because of processing plant capacity. One might be offered
an opportunity to raise birds to different specifications because that
grower has established a track record of successfully innovating her
husbandry practices. A grower might have a contract terminated because
the grower mistreated birds. Although all of these are reasonable and
appropriate business justifications for differential treatment, on the
surface, they could also appear to violate the Proposed Rule. It is
essential that regulated entities be able to make these and other
reasonable business decisions with confidence they will not later face
liability under the Proposed Rule.
Although AMS recognizes in the preamble its intent to ``leav[e]
room for differential treatment based on legitimate business
purposes,'' \61\ that protection is not clearly enshrined in the
regulatory text itself. Specifically, the Proposed Rule fails to
recognize that differential treatment based on a reasonable business
decision does not violate proposed Sections 201.304 or 201.306,
regardless of any other factors. Although AMS references ``legitimate''
business decisions, a more appropriate approach would be to create a
safe harbor for ``reasonable'' business decisions. Courts and agencies
are well versed in applying reasonableness standards, whereas
``legitimacy'' implies value judgments that are far more difficult and,
in any event, inappropriate for evaluating business decisions. Focusing
on ``reasonable business decisions'' would also better harmonize the
Proposed Rule with existing 9 CFR 201.211, creating better
consistency across AMS's PSA regulations.
---------------------------------------------------------------------------
\61\ 87 Fed. Reg. at 60016.
---------------------------------------------------------------------------
Moreover, AMS fails to identify how a company would be expected to
demonstrate that an action was based on a reasonable business decision.
Without clear direction, regulated entities would be forever exposed to
the risk of AMS deciding after the fact that the company lacked
sufficient documentation to demonstrate its decision was appropriate.
Equally as important, the emphasis must be on demonstrating the
existence of a reasonable business decision, as opposed to lack of
existence of any other explanation. Business decisions must be presumed
to be reasonable unless proven otherwise. Business relationships,
especially long-term ones, can be complicated.
Examples of complicated fact patterns abound. Consider, for
instance, a poor performing grower who is unsatisfied with his pay and
initiates a dispute with an integrator and who then grossly mismanages
a flock and creates serious bird welfare issues. The integrator might
reasonably decide to terminate the contract with that grower based on
mistreatment of the birds, regardless of any other considerations, and
it should be enough for the integrator to demonstrate that basis for
the adverse action.
Or consider a grower who is signed to a 1 year contract to make up
grow-out capacity after part of a large multi-house farm is destroyed
by a fire. After the year-long contract is up, the larger farm is once
again operational, the additional grow-out capacity is no longer
needed, and the integrator elects not to renew the grower's contract.
If the temporary grower is a market vulnerable individual, how would
the integrator demonstrate the non-renewal was for appropriate reasons?
Or consider the same example, but several temporary growers were
brought on board for the year, some of whom were market vulnerable
individuals and some of whom were not, and due to demand increase, the
integrator decides to convert some of these temporary growers to
longer-term growers by renewing their contracts. How is the integrator
to evaluate the growers and justify its decisions? Would it have to
prioritize renewing contracts with the market vulnerable individuals?
The Proposed Rule fails to provide any guidance on how a regulated
entity could document its business decisions in these and many other
complicated scenarios.
B. Issues with proposed Section 201.302--Market Vulnerable Individual
AMS proposes an extremely broad and subjective definition of
``market vulnerable individual.'' Under the proposed definition, nearly
anyone could be a market vulnerable individual in one way or another.
Individuals are multifaceted and could be considered members of dozens,
if not hundreds, of groups. So long as a person might be identified
with even one ``group'' whose members are at a ``heightened risk'' of
``adverse treatment,'' the person qualifies as a market vulnerable
individual. This extremely broad definition would in effect require a
company to assume every grower is a market vulnerable individual. This
in turn would create tremendous administrative burden and stifle the
free market contracting that has helped make chicken production so
efficient for consumers and so rewarding for growers.
The proposal overlooks the extremely complex nature of individual
identities. In reality, nearly everybody could identify an aspect of
his or her personhood that could be associated with a group whose
members are at heightened risk of adverse treatment. The proposed
definition goes well beyond concepts of protected classes familiar
under Equal Protection Clause law and instead encompass every facet of
a person's appearance, mannerisms, attitudes, actions, beliefs,
affiliations, lineage, and so on. Any individual is almost certainly a
member of a group that puts the individual at heightened risk of
adverse treatment as well as a group that makes favorable treatment
more likely. The traits that make one a market vulnerable individual
might vary by community or might change over time. An individual's
associations with different groups might change over time as well; if a
person was once part of a group but no longer is, would that person
still be considered a market vulnerable individual? It is impossible to
fully disentangle the complex nature of individuals, but AMS's proposal
would reduce all business decisions to an exercise of identifying every
way in which an individual might face a disadvantage and then requiring
the integrator to prove that no such disadvantage occurred, in every
single interaction with every single grower.\62\
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\62\ Notably, the Proposed Rule also appears to overlook
definitions used in other USDA programs that appear to have similar
goals, providing no analysis of how its proposed definition would
differ or be similar to those or whether it considered basing its
approach on other programs' definitions instead. See, e.g., 7 U.S.C.
2003(e)(1) (defining ``socially disadvantaged groups'' of farmers or
ranchers for USDA target participation rates in certain regulatory
programs as groups ``whose members have been subjected to racial,
ethnic, or gender prejudice because of their identity as members of a
group without regard to their individual qualities'').
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In fact, read plainly, the proposal would lead to absurd results,
with market vulnerable individual protection extending to many people
who ought not receive protection. For example, individuals convicted of
animal cruelty offenses would almost certainly be part of a group
(known animal abusers) who are heightened risk of adverse treatment in
animal production contracting (no integrator would want to entrust its
birds to a known animal abuser), yet AMS's proposal would appear to
protect them as market vulnerable individuals. Ironically, as proposed,
if an integrator perceives a grower to be an animal abuser (a group
whose members are at heightened risk of adverse treatment in poultry
contracting), and that grower in fact abuses chickens, it might be
impossible for the integrator to terminate the grower's contract due to
the abuse because the contract termination would be an adverse action
against someone the integrator perceives to be a market vulnerable
individual on account of that person being a market vulnerable
individual.
Many other unsavory traits could also trigger market vulnerable
individual protection, with the ironic and unfortunate result that
AMS's proposal could actually make it more difficult to refuse dealings
with or to take adverse action against such people. Surely AMS does not
intend such absurd outcomes, but the overly broad and nebulous concept
of a market vulnerable individual all but invites such problems and the
accompanying legal expenses to resolve them.
The Proposed Rule could lead to situations that are less absurd but
just as difficult. Consider an integrator is approached by someone who
wants to raise chickens but who does not speak English. This person
presumably would be a market vulnerable individual. But none of the
integrator's farm service technicians speak the prospective grower's
language, and it would be impossible for them to effectively
communicate with the grower and ensure the grower is able to raise
birds to the integrator's standards. If the integrator declines to sign
a contract with this prospective grower for this reason, the proposal
would appear to treat that as an adverse action based on the
individual's perceived status as a market vulnerable individual, yet
doing business would seem to be impossible in this situation.
Moreover, under the proposal, it is entirely unclear how to
determine whether a regulated entity ``perceives someone to be a market
vulnerable individual. For example, which employee's perception is
relevant--the employee who interacts with the grower, the employee who
approves the contract, the employee who makes placement decisions, or
any of the many other employees likely involved in managing the grow-
out process? What if one employee perceives the grower to be a market
vulnerable individual, but another does not? What if three employees
are jointly involved in a decision with respect to a grower, and one
perceives the grower to be a market vulnerable individual while the
other two do not? What if an employee incorrectly perceives an
individual to be a market vulnerable individual, or perceives someone
to be a market vulnerable individual for an incorrect reason? What if
an employee's perception changes over time or is corrected someone
else? What if a grower indicates he is not a market vulnerable
individual?
The proposal also leaves it unclear how to determine what
constitutes a ``group,'' how to assess that group's ``risk'' of adverse
treatment, and what amount of risk differential constitutes a
``heightened risk,'' again reinforcing that virtually anyone could be a
market vulnerable individual for a myriad of reasons.
The result of this proposed definition would be an avalanche of
paperwork. Integrators would be forced to defensively document every
interaction and business decision for every actual or prospective
grower to demonstrate that individual was not treated adversely due to
his or her status as a market vulnerable individual. The administrative
cost and hassle would be immense and would impose substantial costs on
integrators and growers. With significantly greater stakes for making a
``wrong'' decision, integrators would face a significant disincentive
to bringing on new growers or taking any actions that could create
their exposure with regards to market vulnerable individuals.
C. Issues with proposed Section 201.304(a)--Prohibited Bases
Proposed Section 201.304(a) suffers from numerous issues in
addition to those mentioned above.
As discussed above, many critical terms used in this provision are
vague (e.g., ``inhibit market access,'' ``adverse action,'' ``market
vulnerable individual''). Without clear and concrete definitions, it is
impossible to determine what conduct would violate this section and
thus how to comply. The non-exhaustive list of conduct that constitutes
prejudices or disadvantages makes it impossible to know in advance what
is prohibited. It is likewise unclear when conduct is said to
``inhibit'' market access or how much ``inhibition'' must occur for
there to be a violation. For example, someone new to farming might be
considered a market vulnerable individual under the proposal because
new farmers are riskier business partners than established partners. If
an integrator asks someone new to farming to take modest additional
steps to demonstrate her fitness as a farmer, but does not make the
same request of a longtime farmer, has the integrator ``inhibited mark
access'' of a market vulnerable individual? These vague terms expose
companies to arbitrary after-the-fact review and enforcement. All of
the scenarios described in the sections above illustrate the very real
challenges and costs regulated entities would face in trying to
determine what conduct is appropriate.
It is also unclear how one would determine whether contract terms
are ``less favorable,'' especially when there are multiple terms
involved. One farmer might prefer a short-term contract whereas another
might prefer a longer-term contract. These preferences might also vary
by geography. Similarly, it is unclear how to evaluate contracts where
multiple terms differ. If a contract offered a higher guaranteed base
rate but lower potential overall compensation because of lower bonus
pay opportunities, would that be a more or less favorable term? It
might depend on the individual farmer's preferences.
It is also unclear how contracts entered into at different times,
in different regions, or in different economic conditions would be
compared. Regional economic issues, such as land prices, natural
disaster risk, or fuel prices might require different contracting
approaches even if the growers ultimately earn the same net profit, but
it is unclear whether arrangements like this would be allowed under the
Proposed Rule. If integrators were forced to harmonize all contracts
across regions or time, it could result in windfalls for some growers
or arbitrary cuts for others.
Likewise, it is nearly impossible to determine when differential
contract performance or enforcement might violate the Proposed Rule.
Integrators manage hundreds or thousands of grow-out contracts, and by
necessity, that process requires business judgment. An integrator might
reasonably excuse a one-time issue with a longtime grower who has a
proven track record, whereas that same issue might need require
contract action with a new grower. The same goes with deciding whether
to enter, terminate, or renew a contract.
These provisions would significantly deter entering into new
contracts or new grower relationships, both because the act of entering
into a new contract or relationship would trigger comparisons with all
other contracts, and because it would be difficult to exit a
contractual relationship with a poor performing or inattentive grower.
A rational integrator would be wary under the Proposed Rule about
making any changes to contracts, no matter how reasonable or how
beneficial it would be for a grower, out of fear that the change could
force the integrator to automatically update all other contracts to
avoid allegations of disparate treatment, even if the change was based
on a completely rationale, case-specific issue. Likewise, the Proposed
Rule imposes substantial difficulties and risk in ending a business
relationship, which could create a significant disincentive to entering
into new grower relationships, especially if the prospective grower is
new to farming or unknown to the integrator. The proposal could have
the perverse effect of making it more difficult for individuals not
established in farming, many of whom may be market vulnerable
individuals in one way or another, to enter the chicken farming market
in the first place.
Finally, AMS does not address how to demonstrate compliance. As
described above, the proposal's vague terms and far reach would cloak
nearly all grower-integrator dealings in legal jeopardy, and AMS
provides no direction on how integrators could ensure they comply with
these provisions.
D. Issues with proposed Section 201.304(b)--Retaliation
In addition to those issues mentioned above, we have a number of
concerns with proposed Section 201.304(b).
The list of activities that constitute retaliation is not
exhaustive, so there is no way to know what activities are actually
prohibited. It is impossible for a regulated entity to read the
regulation and understand specifically what actions it must avoid
taking to comply. AMS fails to provide any rules for determining
whether conduct constitutes retaliation, forcing regulated entities to
guess and creating great risk of arbitrary enforcement of what is
essentially a ``you know it when you see it'' standard.
Moreover, it is unclear how it would be established whether a live
poultry dealer, and the specific employees involved in grower
contracting, knew that a grower had engaged in one of the protected
activities. Most of those activities are activities that a live poultry
dealer would not necessarily be aware of, or that only some employees
might know about. As with the above discussion about ``perception'' and
market vulnerable individuals, the Proposed Rule provides no direction
on how to determine what the company knows.
Further, the provision seems to create a presumption that all
protected actions by growers are legitimate. This risks exposing live
poultry dealers to strategically planned actions to trigger retaliation
protections, especially by poor performing growers facing potential
contract termination. This poses especially significant risks in the
event a grower commits animal welfare violations.
The information sharing contemplated in proposed Sections
201.304(b)(2)(iv) and (v) provides no exception for confidential or
proprietary information. The unauthorized release of confidential
business information can inflict substantial and irreparable harm on
businesses. Confidential and proprietary information must be governed
by any contractual protections controlling its dissemination, and it
cannot be considered retaliation if a company exercises its contractual
rights to protect any confidential information. AMS makes no allowance
for this.
It is also unclear how AMS views details related to co-op activity.
For example, regardless of whether growers were to form co-ops, live
poultry dealers would still need to be able to select which specific
growers to contract with, to choose where to place birds, and to
evaluate and approve housing and other grow-out specifications. The
Proposed Rule is silent on whether exercising these basic logistical
and business prerogatives could be considered retaliation.
E. Issues with proposed Section 201.304(c)--Recordkeeping
The recordkeeping provision in proposed Section 201.304(c) raises
several issues in addition to those discussed above.
The proposal fails to identify specific records that would need to
be kept, or what records would need to be generated to show compliance
with proposed Section 201.304(a) and (b). As proposed, companies will
not know which records are actually subject to the regulation's
recordkeeping provision until after the fact. There is simply no way
for a regulated entity to know what records AMS might consider, years
after the fact, to have been ``relevant to its compliance'' with
proposed Section 201.304. This exposes companies to arbitrary
enforcement, including arbitrary allegations of record destruction.
The proposed recordkeeping provision is as broad as it is vague.
Potentially every document related to grower interactions--every email,
every record from a farm visit, every correspondence with farm
technical support staff, and every note taken during a call or meeting
could in theory be ``relevant to . . . compliance'' with proposed
Section 201.304, triggering the proposed 5 year record-retention
period. This would create an overwhelming administrative burden on
regulated entities and would impose exorbitant compliance costs. AMS
fails to explain why such a broad recordkeeping provision is necessary
or provide specificity about what records must be kept to demonstrate
compliance.
Moreover, it is inappropriate to include Board of Director
materials and other corporate governance materials as routine PSA
compliance records, as suggested in the Proposed Rule. These materials
are not routine compliance records and would not speak to whether any
particular act violated the Proposed Rule. Instead, this appears to be
a transparent attempt to create executive- or Board-level liability for
everyday regulatory compliance matters.
Finally, the record retention period is excessively long. Most
other PSA recordkeeping provisions require retention for 2 years. Five
years is needlessly long and imposes substantial administrative costs
and complexity. There is simply no reason to require such voluminous
records maintenance.
F. Issues with proposed Section 201.306--Deceptive Practices
In addition to those discussed above, proposed Section 201.306
raises several significant issues.
As discussed earlier, AMS does not define what a ``pretext'' is in
this context, nor how a company would demonstrate that an explanation
is not pretextual. Without knowing what would make a statement
pretextual, companies may become reluctant to provide detailed
explanations to growers, stifling rather than promoting clear
communication. And without a clear definition, companies would have no
idea how to ensure they comply or demonstrate they are in compliance
after the fact. The Proposed Rule seems to invite second-guessing of a
regulated entity's motives. Without knowing how to demonstrate
compliance, regulated entities are at great risk of not having the
necessary records to refute allegations.
In many cases, there are multiple reasons for a contract action.
The proposal does not address a situation where multiple reasonable
business reasons support an action and could be read as requiring that
every single reason be included in an explanation to avoid an omission
of material fact in violation of the Proposed Rule, even if one factor
drove the decision or any one factor would have formed a sufficient
basis for the action.
The proposed provisions also risk making it more difficult and more
costly to terminate relationships with poorly performing growers or a
grower who neglects or abuses birds. Facing the fear of making a
misstep in communicating a grower's termination, regulated entities may
be incentivized to keep poor-performing growers on contract to avoid
costly lawsuits about pretextual explanations and whether a particular
fact was material. This would drain efficiency out of the system, to
the detriment of consumers.
Fundamentally, the proposed provisions will impair efficient
contracting by deterring legitimate adverse actions. If each adverse
action creates the risk of litigation and large liabilities, regulated
entities will face disincentives to terminating dealings with poor-
performing growers or engaging in discussions with new growers. This is
doubly harmful for individuals wishing to enter chicken farming, as it
means poor-performing growers will occupy more of the grow-out supply,
and they will face a harder time getting started. This will only harm
rural communities long-term as younger farmers see fewer financial
opportunities in their communities.
III. The Proposed Rule Would Impose Significant Costs on Society
AMS appears to have given no thought to its economic impact
analysis, drastically underestimating the costs of the Proposed Rule at
every possible opportunity. To prepare for the Proposed Rule, regulated
entities would need to re-assess contracts and develop communications
with their growers, evaluate and implement extensive recordkeeping
programs and record-retention systems, develop and implement new
compliance policies, and implement an administratively complicated
oversight and compliance system. These programs would require highly
paid professionals and substantial attorney time. Moreover, the
proposal would make contracting more difficult, and it could deter
companies from entering into new grower relationships, reducing overall
economic efficiency in the poultry production market, driving up
consumer costs, harming processors, and harming growers. The proposal
would also drive costly, frivolous litigation. In fact, owing to its
vagueness, the Proposed Rule almost seems premised on the need for
years of litigation to define and refine the ambiguous terms AMS has
proposed. The litigation costs necessary to define the requirements in
the proposal alone would amount to many millions of dollars per year,
on top of the likely frivolous litigation that will be brought based on
a misunderstanding of, or perhaps to take advantage of, the proposal's
vagueness.
AMS predicts the Proposed Rule would impose costs of only $504 per
live poultry dealer in the first year, and costs of about half that
amount in subsequent years. This simply defies belief. It seems to
assume that regulated entities would devote no effort and no resources
to complying with the proposal. The cost of the actual filing cabinets
needed to hold the voluminous paper records that would be required by
the Proposal would exceed that much, not to mention the extensive
recordkeeping programs and computer systems and hardware that would be
necessary to properly manage digital materials. AMS likewise completely
overlooks the labor that would be necessary to comply with the proposal
and dramatically understates the extent and cost of the professional
services, including legal services, that would be necessary to
implement the proposal. Moreover, AMS completely fails to consider the
cost of the litigation that will undoubtedly result from the vague
terms and unclear scope rife throughout the Proposed Rule.
AMS also fails to consider costs to growers, who as part of the
same economic system would inevitably bear some of the compliance
costs. New growers would face fewer opportunities for new entrants, and
it would be more difficult to reward top-performing growers. Consumers,
too, would suffer costs in the form of a less efficient chicken
production system, leading to higher costs at the supermarket and
restaurants. AMS fails to even acknowledge these costs.
In reality, the cost of compliance together with anticipated
litigation will undoubtedly result in costs of over $100 million,
orders of magnitude greater than AMS predicts. By comparison,
independent economic analyses of previous AMS rulemakings on similar
topics have indicated economic impact costs in excess of $1
billion,\63\ and these were prepared 13 years ago, before unprecedented
inflation. It is simply not credible for AMS to conclude the Proposed
Rule would impose such paltry costs.
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\63\ Scope of Sections 202(a) and (b) of the Packers and Stockyards
Act, 81 Fed. Reg. 92566, 92576 (discussing cost estimates prepared by
Thomas Elam and Informa Economics).
---------------------------------------------------------------------------
IV. Conclusion
NCC appreciates the opportunity to comment on the Proposed Rule. We
are deeply concerned that the Proposed Rule would impose substantial
costs, expose live poultry dealers to significant legal and compliance
risks, and undermine the successful and mutually profitable grower
contracting system. We urge AMS to withdraw the proposal. If AMS were
to continue to pursue this rulemaking, it should repropose this and all
other similar PSA proposals together in a single consolidated
rulemaking process.
Sincerely,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mike Brown,
President,
National Chicken Council.
Exhibit 5: NCC Comments to Docket No. FSIS-2022-0029 Proposed
Salmonella Framework (Dec. 16, 2022)
December 16, 2022
Submitted electronically via regulations.gov
Docket Clerk,
Food Safety and Inspection Service,
U.S. Department of Agriculture,
Washington, DC
Sandra Eskin,
Deputy Under Secretary for Food Safety,
Food Safety and Inspection Service,
United States Department of Agriculture
Washington, DC
Re: Docket No. FSIS-2022-0029: Proposed Framework for Controlling
Salmonella in Poultry
Dear Ms. Eskin:
The National Chicken Council (NCC) appreciates the opportunity to
provide comments regarding the United States Department of Agriculture
(USDA), Food Safety and Inspection Service (FSIS or the Agency)
Proposed Framework for controlling Salmonella in poultry. NCC is the
national, nonprofit trade association that represents vertically
integrated companies that produce and process more than 95 percent of
the chicken marketed in the United States.
The Agency's Proposed Salmonella Framework raises several questions
about numerous complex topics, including risk assessment and public
health modeling, pathogenicity data, current and future laboratory
testing technologies, detailed applications of highly technical Hazard
Analysis and Critical Control Point (HACCP) systems, and legal and
technical considerations, to name but a few. NCC member companies would
be significantly impacted by the Agency's Proposed Framework, and NCC
encourages the Agency to take a science-based, data-driven approach to
impacting public health. However, as the Proposed Framework is not
based on science, data, or the results of a risk assessment(s), it is
challenging for the regulated industry to provide meaningful comments.
Instead, we encourage the Agency to take a more measured approach and
use robust data demonstrating true impact on public health when
proposing sweeping regulatory changes.
The concerted efforts by both the broiler chicken industry and FSIS
to drive down Salmonella rates have been enormously successful. Based
off the most recent FSIS testing results,\1\ Salmonella prevalence on
young chicken carcasses is 3.1% and Salmonella prevalence on chicken
parts is 7.1% across all broiler processing establishments. These
testing results are well below the Salmonella performance standard for
both young chicken carcasses and chicken parts. Coupled with
performance standards, currently over 90% of the industry is meeting or
exceeding the performance standard for both young chicken carcasses and
chicken parts.\2\ In just the past few years, FSIS has significantly
tightened existing Salmonella standards; introduced new performance
standards for chicken parts; rolled out a new, scientifically driven,
modernized poultry inspection system that allows for greater testing
and analysis; released detailed guidance on controlling Salmonella
through processing controls; and approved numerous new interventions;
among many other endeavors. FSIS has taken or is in the process of
rolling out similar programs for other species. These actions are
consistent with the science-based, data-driven actions NCC believes are
beneficial to public health.
---------------------------------------------------------------------------
\1\ FSIS, Sampling Results for FSIS Regulated Products, USDA.gov
(2022), https://www.fsis.usda.gov/science-data/sampling-program/
sampling-results-fsis-regulated-products.
\2\ Salmonella Verification Testing: October 31, 2021 through
October 29, 2022, FSIS (2022), https://www.fsis.usda.gov/news-events/
publications/salmonella-verification-testing-october-31-2021-through-
october-29-2022.
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As with FSIS, food safety is a top priority for the broiler chicken
industry, and we support changes in food safety regulations that are
based on sound science, robust data, and are demonstrated to positively
impact public health. For years the industry has implemented a multi-
hurdle approach focused on the continual reduction of Salmonella from
farm to fork--implementing robust vaccination, biosecurity, sanitation,
and other effective measures.
In 1996, the CDC created FoodNet Fast to display data for select
pathogens transmitted through food, including Salmonella.\3\ While the
incidence of salmonellosis in humans has remained relatively unchanged
since 1996, Americans eat significantly more chicken and chicken
products today than in 1996. In 1996, chicken consumption in the U.S.
was 69.7 pounds per person. In 2022, USDA estimates that Americans will
consume 99.0 pounds of chicken per person.\4\ This reflects a 42%
increase in chicken consumption over the past 26 years. Neither FoodNet
Fast nor Interagency Food Safety Analytics Collaboration (IFSAC) \5\
takes into account consumption patterns of various food sources,
including chicken. When the data from both FoodNet Fast and IFSAC are
analyzed based on per-pound consumption of chicken, the rate of
salmonellosis associated with chicken is shown to have decreased over
the past 10+ years. This data demonstrates that the robust public-
health measures implemented by FSIS and the chicken industry over the
past decade have been working.
---------------------------------------------------------------------------
\3\ FoodNet Fast, Center for Disease Control (2022), https://
wwwn.cdc.gov/foodnetfast/.
\4\ USDA, World Agricultural Supply and Demand Estimates (Dec. 9,
2022), https://www.usda.gov/oce/commodity/wasde/wasde1222.pdf.
\5\ Center for Disease Control, Interagency Food Safety Analytics
Collaboration (IFSAC), CDC.gov (2022), https://www.cdc.gov/foodsafety/
ifsac/publications.html.
---------------------------------------------------------------------------
In short, FSIS's existing framework for approaching Salmonella
control has been working, and NCC encourages FSIS to continue using the
latest science and industry-Agency collaborations to drive improvements
in this framework. For example, as discussed in these comments,
science-based changes such as transitioning to an enumeration-based
performance standard would apply new technological and scientific
developments to FSIS's proven approach and would drive continued food
safety improvements.
The Proposed Framework would abandon these approaches for legally
infirm and technologically infeasible strategies with no clear
supporting data. While NCC appreciates FSIS's interest in thinking
creatively about food safety, the Proposed Framework is not the right
approach. First, the Proposed Framework appears premised on legally
infirm conclusions that Salmonella may be considered an adulterant in
raw poultry and that FSIS can mandate on-farm activities. Second, the
Proposed Framework is presented nearly devoid of data, and it lacks
specificity as to how the Agency plans to implement and enforce the
proposed changes. Additionally, there appears to be a significant
misunderstanding about how the broiler industry operates, the
industry's supply chain structure, and current industry practices
regarding the control of Salmonella. As written, the Proposed Framework
threatens the economic viability of the entire poultry sector and
threatens negative impacts on family farmers, company employees, and
consumers. The Proposed Framework would have negative impacts on both
the availability of chicken and the cost of chicken to consumers of
U.S. chicken around the world. Overall, the Proposed Framework appears
to be moving away from long-standing HACCP-based principals that focus
on identifying and controlling risk to a command and control, once-
size-fits-all approach that could have significant negative public
health outcomes.
These comments address overarching concerns regarding FSIS's
statutory authority under the Poultry Products Inspection Act (PPIA)
and the lack of supporting data presented with the Proposed Framework,
provide feedback on each of the three Components, and finally address
several cross-cutting issues raised in the Proposed Framework.
Salmonella Is Not an Adulterant Under the Poultry Products Inspection
Act
Fundamentally, the Proposed Framework is legally infirm because
Salmonella is not an adulterant in raw chicken under the PPIA.
Under the PPIA, a product is adulterated if it ``bears or contains
any poisonous or deleterious substance which may render it injurious to
health; but in case the substance is not an added substance, such
article shall not be considered adulterated under this clause if the
quantity of such substance in or on such article does not ordinarily
render it injurious to health.'' \6\ Thus, whether a pathogen renders a
product adulterated depends on whether the substance is added to the
product or occurs naturally in the product. For added substances, the
pathogen is an adulterant only if the substance is present in
quantities that ``ordinarily'' render the product injurious to health.
As FSIS has consistently recognized, Salmonella is not an adulterant in
raw poultry because (i) Salmonella is not an added substance in raw
poultry and (ii) Salmonella is not present in levels that render
chicken injurious to health because customary cooking practices destroy
any Salmonella that may be present. FSIS has offered nothing to change
this interpretation.
---------------------------------------------------------------------------
\6\ 21 U.S.C. 453(g)(1).
---------------------------------------------------------------------------
First, Salmonella is not an added substance because it occurs
naturally within the chicken biome. Salmonella is not an avian
pathogen, and it exists naturally as part of the microflora in and on
chicken. Salmonella can exist in a chicken's skin, muscle tissue, and
gut. Peer-reviewed literature establishes that healthy, asymptomatic
birds are known to carry Salmonella.\7\ Researchers have also
identified Salmonella in chicken neck skin, on the outer layer of skin,
on feather follicles, connective tissue, and in drumstick muscle.\8\
Moreover, literature shows correlations between Salmonella loads on the
farm or in birds and at various processing steps, reinforcing that
Salmonella enters the process via the chickens themselves.\9\
---------------------------------------------------------------------------
\7\ See, e.g., Rigney, C.P., Salamone, B.P., Anandaraman, N., Rose,
B.E., Umholtz, R.L., Ferris, K.E., et al. (2004). Salmonella serotypes
in selected classes of food animal carcasses and raw ground products,
January 1998 through December 2000. J. Am. Vet. Med. Assoc. 224, 524-
530. doi: 10.2460/javma.2004.224.524; Nde, C.W., Mcevoy, J.M.,
Sherwood, J.S., and Logue, C.M. (2007). Cross contamination of turkey
carcasses by Salmonella species during defeathering. Poult. Sci. 86,
162-167. doi: 10.1093/ps/86.1.162; Erol, I., Goncuoglu, M., Ayaz, N.D.,
Ellerbroek, L., Ormanci, F.S., and Kangal, O.I. (2013). Serotype
distribution of Salmonella isolates from turkey ground meat and meat
parts. Biomed Res. Int. 2013, 281591. doi: 10.1155/2013/2 81591.
\8\ See Rimet C.-S., Maurer J.J., Pickler L., Stabler L., Johnson
K.K., Berghaus R.D., Villegas A.M., Lee M. and Franca M. (2019)
Salmonella Harborage Sites in Infected Poultry That May Contribute to
Contamination of Ground Meat. Front. Sustain. Food Syst. 3:2. doi:
10.3389/fsufs.2019.00002.
\9\ See, e.g., Berghaus, R.D., Thayer, S.G., Law, B. F., Mild,
R.M., Hofacre, C.L., and Singer, R.S. 2013. Enumeration of Salmonella
and Campylobacter spp. in Environmental Farm Samples and Processing
Plant Carcass Rinses from Commercial Broiler Chicken Flocks. Applied
and Environmental Microbiology. 79: 4106-4114; Volkova V.V., Bailey
R.H., Rybolt M.L., Dazo-Galarneau K., Hubbard S.A., Magee D., Byrd
J.A., Wills R.W. 2010. Inter-relationships of Salmonella status of
flock and grow-out environment at sequential segments in broiler
production and processing. Zoonoses Public Health 57: 463-475; Fluckey,
W.M., Sanchez M.X., McKee S.R., Smith D., Pendleton E., Brashears M.M.
2003. Establishment of a microbiological profile for an air-chilling
poultry operation in the United States. J. Food Prot. 66: 272-279.
---------------------------------------------------------------------------
The fact that Salmonella may be present in greater expected
concentrations in some parts of a chicken than others is irrelevant to
this analysis, as is the fact that Salmonella, as with any microbe, can
be spread through cross-contact during processing. The PPIA asks only
whether the organism is an added substance when determining if it is an
adulterant. To view all pathogens that can be somehow spread among or
within products as ``added substances'' would read out of existence the
second prong of 453(g)(1) and is simply inconsistent with the normal
meaning of the term. Moreover, courts have been clear that an ``added
substance'' refers to a substance not otherwise present in the food and
added by man.\10\ As established, Salmonella occurs naturally within
chickens. Salmonella is not an added substance in raw poultry, and thus
it is an adulterant only if it ``ordinarily'' renders the product
injurious to health.\11\ It does not.
---------------------------------------------------------------------------
\10\ See United States v. Coca Cola, 241 U.S. 265 (1915); United
States v. Anderson Seafoods, Inc. 622 F.2d 157, 160 (5th Cir. 1980).
\11\ FSIS recognized that Salmonella is not an added substance in
its recent 2022 denial of a petition requesting Salmonella be declared
as an adulterant, noting that ``FSIS has traditionally viewed
Salmonella as `naturally occurring' in food animals.'' Letter from
Rachel Edelstein to William D. Marler, Esq., at 3 (May 31, 2022).
Although FSIS in that petition response noted it was considering
reassessing its long-held view, the Agency still has provided no
information to explain why Salmonella--which comes into plants on
chicken skin and inside chickens, including in the muscle tissue--is
not a substance naturally occurring in chickens. More established
agency precedent reinforces that Salmonella is naturally occurring in
raw chicken. See, e.g., Letter from Carmen Rottenberg, Acting Deputy
Undersecretary, Office of Food Safety, to Laura MacCleery, Director,
Center for Science in the Public Interest, at 1-2 (Feb. 07, 2018) (``We
also disagree with your assertion that ABR Salmonella is an `added
substance' within the meaning of the adulteration provisions of the
FMIA and PPIA.'').
---------------------------------------------------------------------------
Salmonella does not ``ordinarily'' render raw chicken injurious to
health. The PPIA establishes a very high standard to support a
conclusion that a naturally occurring pathogen ``ordinarily'' renders a
raw product adulterated. First, in the PPIA, Congress created a strong
presumption against viewing a naturally occurring substance as an
adulterant in raw products. Congress's choice of language is striking:
under the PPIA, added substances adulterate food if they ``may render
it injurious to health,'' whereas a product with naturally present
pathogens ``shall not be considered adulterated'' if the substance
``does not ordinarily render it injurious.'' \12\ The statute thus sets
up two very different standards. ``May'' could imply FSIS has a measure
of discretion in evaluating added substances, but the statute sets a
significantly higher bar for naturally occurring substances. FSIS is
prohibited from considering a naturally occurring substance a pathogen
(``shall not be considered adulterated'') unless it can meet the very
high bar of proving that the substance would ``ordinarily'' render the
product injurious to health. Reinforcing this high bar, in its
statement of policy codified into the PPIA, Congress commanded that
decisions such as product condemnation ``shall be supported by
scientific fact, information, or criteria.'' \13\ By default, naturally
occurring substances are not pathogens, and FSIS must go to great
scientific lengths to establish otherwise.
---------------------------------------------------------------------------
\12\ 21 U.S.C. 453(g)(1).
\13\ 21 U.S.C. 452.
---------------------------------------------------------------------------
Second, the plain meaning of ``ordinarily'' sets a very high bar.
When a statute does not define a term--and the PPIA does not define
``ordinarily injurious''--courts will consider its plain meaning with
reference to its reasonable use, dictionary definitions, and its use in
context.\14\ Multiple dictionary definitions contemporaneous with the
passage of the PPIA show us what Congress meant when it used
``ordinarily.'' Webster's 1953 edition defines ``ordinarily'' as
``according to established rules or settled method.'' \15\ Black's Law
Dictionary, 1951 edition, defines the adverb by reference to
``ordinary,'' stating it means ``regular'' or ``normal.'' \16\ And
Oxford English Dictionary, which examines the historical development of
the term, defines it as ``[b]elonging to the regular or usual order or
course'' or occurring in ``regular custom or practice.'' \17\ The term
retains its meaning in modern parlance and as defined ``usually; as a
rule.'' \18\ Thus, under the plain language of the PPIA, a naturally
occurring substance can be considered an adulterant only if the
substance ``regularly'' or ``normally,'' or through ``regular or usual
. . . course'' or ``regular custom or practice,'' or ``usually'' or
``as a rule'' renders the product injurious to health.\19\ This simply
is not the case.
---------------------------------------------------------------------------
\14\ Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997).
\15\ Webster's New Twentieth Century Dictionary 1177 (1953).
\16\ Ordinary, Black's Law Dictionary (4th ed. 1951).
\17\ Ordinary, Oxford English Dictionary (2d ed., 1989).
\18\ Ordinarily, Webster's New World College Dictionary (4th ed.,
2010).
\19\ The legislative history behind comparable language in the
Federal Food, Drug, and Cosmetic Act reinforces this interpretation. In
one debate, members stated ``ordinarily injurious'' meant ``that
people--substantial numbers of people--must actually be harmed by the
product before it can be restricted in any way. This provision . . .
puts the burden of proof on the FDA.'' 120 Cong. Rec. 36007 (1974)
(Statement of Rep. Peter Kyros).
---------------------------------------------------------------------------
As is well established, thorough cooking destroys Salmonella.
Specifically, cooking raw chicken to an internal temperature of 165 F
achieves a 7-log reduction in Salmonella.\20\ In fact, even a slightly
lower temperature still achieves instant lethality (162 F or 163 F,
depending on the fat content), as can reaching yet-lower-still
temperatures with sufficient dwell time, often of just a few
seconds.\21\ Even in the event raw chicken were cooked at yet lower
temperatures, there would be a substantial log-reduction in Salmonella.
---------------------------------------------------------------------------
\20\ FSIS, FSIS Cooking Guidelines for Meat and Poultry Products
(Revised Appendix A), Table 3, USDA.gov (2021), https://
www.fsis.usda.gov/sites/default/files/media_file/2021-12/Appendix-
A.pdf.
\21\ FSIS, FSIS Cooking Guidelines for Meat and Poultry Products
(Revised Appendix A), Table 3, USDA.gov (2021), https://
www.fsis.usda.gov/sites/default/files/media_file/2021-12/Appendix-
A.pdf.
---------------------------------------------------------------------------
Consumers customarily cook chicken in a manner that achieves
thorough cooking and destroys Salmonella. Chicken is customarily cooked
through. Consumers are regularly reminded to use a meat thermometer to
cook chicken to an internal temperature of 165 F--including on the
package itself--which achieves lethality. While NCC's strong
recommendation is that consumers use a meat thermometer, other less
analytical ways to gauge ``doneness'', such as cutting into the meat to
see if it is visibly white and firm, are also highly likely to achieve
lethality and certainly cannot be said to ``usually'' or ``normally''
result in the product being injurious to health. Chicken is not
customarily cooked ``rare'' or ``medium,'' and waitstaff at restaurants
do not ask patrons how they would like their chicken cooked because the
default approach is to cook chicken all the way through. Certainly, it
is not the case that due to handling and cooking practices, Salmonella
in ``regular custom or practices'' causes the chicken to be injurious
to health.
In this manner, Salmonella in raw chicken is fundamentally
different than Shiga toxin producing E. coli (STECs) in raw non-intact
beef. FSIS attempts to draw parallels between these product-pathogen
pairs, but the analysis misses the key distinctions. In the Proposed
Framework, FSIS attempts to reduce its 1994 decision declaring E. coli
O157:H7 an adulterant in raw ground beef (and subsequent extension to
STECs in raw non-intact beef) to a set of ``criteria,'' all of which
appear equally weighted: association with human illness, low infectious
dose, severity of human illness, and typical consumer cooking
practices.\22\ However, that is not actually the approach FSIS took,
nor is it the analysis courts performed when evaluating FSIS's E. coli
policy.
---------------------------------------------------------------------------
\22\ Proposed Salmonella Framework at 10.
---------------------------------------------------------------------------
In fact, FSIS's analysis turned primarily on whether E. coli was
likely to be destroyed under customary cooking practices for raw ground
beef. In explaining its policy on E. coli O157:H7, FSIS provided
background on the risks of E. coli O157:H7 but then expressly tied E.
coli O157:H7's status as an adulterant to cooking practices: ``Raw
ground beef products present a significant public health risk because
they are frequently consumed after preparation (e.g., cooking hamburger
to a rare or medium rate state) that does not destroy E. coli O157:H7
organisms that have been introduced below the product's surface.'' \23\
If that were not clear enough, FSIS continued, ``the Agency believes
that the status under the FMIA of beef products contaminated with E.
coli O157:H7 must depend on whether there is adequate assurance that
subsequent handling of the product will result in food that is not
contaminated when consumed.'' \24\ Cooking practices were expressly the
dispositive factor. This is reinforced by the fact that FSIS determined
that intact cuts of beef, when contaminated with the exact same E. coli
O157:H7, were not adulterated because ``[i]ntact steaks and roasts and
other intact cuts of muscle with surface contamination are customarily
cooked in a manner than ensures that these products are not
contaminated with E. coli O157:H7.'' \25\ FSIS again cited to customary
cooking practices as the dispositive point in its 2011 Federal Register
notice declaring several other STECs to similarly be adulterants in raw
non-intact beef.\26\ Thus, rather than being a four-factor analysis as
presented in the Proposed Framework, there is only question: whether
the customary cooking practices would ordinarily render the product
injurious to health.
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\23\ FSIS, Beef Products Contaminated with Escherichia Coli
O157:H7, 64 Fed. Reg. 2803, 2803 (Jan. 19, 1999) (emphasis added).
\24\ Id. (emphasis added).
\25\ Id. at 2804 (emphasis added).
\26\ FSIS, Siga Toxin-Producing Escherichia coli in Certain Raw
Beef Products, 76 Fed. Reg. 58157, 58158 (Sept. 20, 2011).
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Courts recognize this distinction as pivotal. In upholding FSIS's
E. coli O157:H7 sampling program, and in a case that fundamentally
turned on whether E. coli O157:H7 could properly be considered an
adulterant in raw ground beef, the District Court for the Western
District of Texas focused on whether the cooking practices that most
Americans considered ``proper'' for ground beef were sufficiently
``thorough'' as to destroy E. coli O157:H7:
However, unlike other pathogens, it is not ``proper'' cooking
but ``thorough'' cooking that is necessary to protect consumers
from E. coli. The evidence submitted by Defendants indicates
that many Americans consider ground beef to be properly cooked
rare, medium rare, or medium. The evidence also indicated that
E. Coli contaminated ground beef cooked in such a manner may
cause serious physical problems, including death. Therefore, E.
Coli is a substance that renders ``injurious to health'' what
many Americans believe to be properly cooked ground beef.\27\
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\27\ Texas Food Industry Ass'n v. Espy, 870 F. Supp. 143, 149 (W.D.
Tex., 1994).
In Texas Food Industry Association, just as in FSIS's explanation,
the entire analysis turned on whether customary consumer cooking
practices were sufficient. Under the court's reasoning, had what
consumers understood to be ``proper'' cooking been adequate to destroy
E. coli O157:H7 in hamburgers, then the substance would not have been
an adulterant (just as it is still not an adulterant on raw intact
beef).
But raw chicken is handled very differently than ground beef.
Consumers do not customarily consider it ``proper'' to cook a medium
rare chicken breast. Even ground chicken products such as chicken
burgers or meatballs are customarily cooked through, not served rare.
What consumers consider to be the ``proper'' or ``customary'' method is
also a method that cooks chicken ``thoroughly.'' \28\
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\28\ Other critical distinctions exist between STECs in raw non-
intact beef and Salmonella in raw poultry. For example, E. coli
typically enters the cattle slaughter process through cross
contamination with fecal matter on the outside of the hide, which can
get transferred to the meat if sanitary practices are not observed. By
contract, Salmonella actually enters in the chicken, including in
edible parts of the chicken. No amount of process control or sanitary
dressing can prevent its being in the product because it starts out in
the product.
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Courts have likewise recognized this distinction. The Fifth Circuit
recognized that ``Salmonella [is] present in a substantial proportion
of meat and poultry products'' and ``is not an adulterant per se''
because ``normal cooking practices for meat and poultry destroy the
Salmonella organism.'' \29\ The D.C. Circuit reached a similar
conclusion in American Public Health Ass'n v. Butz, holding ``the
presence of salmonellae on meat does not constitute adulteration'' and
that ``American housewives and cooks are not ignorant or stupid and
their methods of preparing and cooking of food do not ordinarily result
in salmonellosis.'' \30\ In other words, existing circuit precedent
indicates the mere ``presence of Salmonella in meat products,'' without
more, does not support USDA regulation under 453(g)(1).\31\
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\29\ Supreme Beef Processors, Inc. v. U.S. Dep't of Agric., 275
F.3d 432, 438-39 (5th Cir. 2001).
\30\ American Public Health Ass'n v. Butz, 511 F.2d 331, 334
(D.C.Cir.1974).
\31\ See also, e.g., Starr Surplus Lines Ins. Co. v. Mountaire
Farms Inc., 920 F.3d 111, 117 (1st Cir. 2019) (``[T]he mere fact of the
FSIS-orchestrated recall does not give rise to the plausible inference
that the type of Salmonella found . . . could not be eliminated by
proper cooking.''); Craten v. Foster Poultry Farms Inc., 305 F. Supp.
3d 1051, 1058 (D. Ariz. 2018) (observing that existing case law
``suggests Salmonella is not an adulterant'' and rejecting several
state law tort claims because Salmonella ``is killed through proper
cooking, which is how raw chicken products are intended to be used'').
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FSIS, too, has long and consistently recognized that Salmonella is
not an adulterant in raw poultry. For example, as recently as this
year, FSIS denied a petition requesting FSIS declare certain Salmonella
strains to be adulterants in raw poultry. In 2018, FSIS denied a
different petition making a similar request to declare certain
Salmonella strains as an adulterant in raw meat and poultry. In its
2016 Federal Register notice announcing new Salmonella performance
standards for poultry, FSIS clearly explained, ``Salmonella is not an
adulterant in NRTE poultry products.'' \32\ In 2014, FSIS rejected a
petition to declare antibiotic resistant Salmonella an adulterant,
stating ``we are not aware of any data to suggest that consumers
consider ground poultry . . . to be properly cooked when rare, medium
rare, or medium.'' \33\ Crucially, USDA has never argued that
Salmonella is an adulterant under 453(g)(1). Instead, it has argued
the opposite in litigation and policy documents. For example, in the
Supreme Beef case on the enforceability of Salmonella performance
standards, the court noted, ``The USDA agrees in this case that
Salmonella is not a[n] . . . adulterant.'' \34\
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\32\ FSIS, New Performance Standards for Salmonella and
Campylobacter in Not-Ready-to-Eat Comminuted Chicken and Turkey
Products and Raw Chicken Parts and Changes to Related Agency
Verification Procedures: Response to Comments and Announcement of
Implementation Schedule, 81 Fed. Reg. 7285, 7297 (Feb. 11, 2016).
\33\ Letter from Daniel Engeljohn, Assistant Adm'r, Off. of Pol'y &
Program Dev., USDA, to Sarah Klein, Food Safety Program (July 31,
2014).
\34\ Supreme Beef, 275 F.3d at 439 n. 21.
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In light of this long and consistent history, and even if the PPIA
were to permit such an interpretation, FSIS would be hard-pressed to
provide a rationale that its change in policy was not arbitrary and
capricious or that an abrupt change in position was warranted by the
record.\35\ As it stands, FSIS has presented no data to support a
conclusion that Salmonella in raw chicken ``ordinarily'' or ``usually''
renders chicken injurious to healthy under customary cooking practices.
---------------------------------------------------------------------------
\35\ See Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins.
Co., 463 U.S. 29, 34 (1983).
---------------------------------------------------------------------------
Finally, the Proposed Framework would entail creating new
substantive requirements affecting the rights of NCC member companies,
which would make it a legislative rule, and would require amending or
creating multiple regulations. If FSIS were to pursue the Proposed
Framework, the Administrative Procedure Act would require FSIS to
engage in a substantial amount of notice-and-comment rulemaking, which
would require FSIS to develop and make available for public comment a
record comprehensively addressing the numerous factual and scientific
issues raised by the Proposed Framework.
Fundamentally, FSIS has provided no explanation for making an
abrupt change in its approach to Salmonella in raw poultry, as it would
be required to do. Under the plain language of the PPIA and long-
standing case law, FSIS cannot compile a scientific basis for declaring
Salmonella an adulterant in raw poultry. Accordingly, the Proposed
Framework stands on infirm legal footing. We urge FSIS to instead
pursue alternative approaches for which it has authority, such as
revamped Salmonella performance standards, as explained elsewhere in
these comments.
The Proposed Framework Lacks Adequate Supporting Data
As a public health agency, FSIS has long promoted the use of sound
science-based decision-making, which by definition must be based on,
and driven by, scientific data. FSIS has presented no data to suggest a
change in policy is needed or to the support the proposals or
assumptions in the Proposed Framework. This is regrettable, as without
supporting data, the Proposed Framework appears almost entirely
speculative. The complete lack of data makes it impossible to provide
meaningful feedback on key areas, such as whether the data calls for a
change in policy, whether the Proposed Framework is supported by the
data, and whether the specific elements of the Proposed Framework were
developed appropriately in light of that data. NCC firmly believes that
it is imperative that public health decisions and policy follow the
data, not the other way around.
Data Issues Related to the Proposed Framework
FSIS must first develop data and conduct risk assessments and use
that data to determine what, if any, policy changes are called for.
There are a number of key missing data elements. For example:
There is no data to support the idea that Salmonella levels
on incoming flocks overwhelm food safety systems or would need
to be monitored.
There is not data to demonstrate that setting a finished
product standard would have public health impacts, or what
standard to even set.
There is no data to suggest that additional testing during
the process beyond what is already done would be impactful.
We understand that FSIS has not even begun the two risk
assessments, which would presumably provide useful insight to
use in developing policy proposals.
In effect, the Proposed Framework seems to reflect a presumption
that the proposed changes would be effective and has asked stakeholders
to rebut that presumption. This applies the policy development process
backwards.
Moreover, without data or details, it is impossible to provide
meaningful feedback on the proposal. For example, stakeholders have no
ability to assess whether the data supports the proposed actions or
whether the actions are appropriate in light of the data. The Proposed
Framework is devoid of virtually all key details, raising many
questions and leaving just as many unanswered. To take but one example,
FSIS has not explained why it has contemplated proposing a 1 CFU/g
finished product standard, especially given that FSIS testing has a
limit of detection (LOD) at 10 CFU/g and cannot accurately enumerate at
the 1 CFU/g level and that FSIS has not begun two risk assessments
seemingly designed to address this exact question.
What little data FSIS has referenced contains significant flaws:
CDC's National Outbreak Reporting System, or NORs, is a web-
based platform that launched in 2009.\36\ It is used by local,
state, and territorial health departments in the United States
to report all waterborne and foodborne disease outbreaks and
enteric disease outbreaks transmitted by contact with
environmental sources, infected persons or animals, or unknown
modes of transmission to CDC. From 2009 to 2020, NORs reported
15,344 poultry-related Salmonella illnesses, which represents
29.3% of all Salmonella illnesses (there were 52,374 total
Salmonella illnesses reported from 2009 to 2020). Critically,
however, that figure lumps together illness from both live
poultry (e.g., handling a backyard flock) and consumption of
poultry. Separating out the live-poultry exposures yields a
very different result. 8,475 of the 15,344 poultry-related
illnesses were attributed to live poultry--for example,
handling chicks or interacting with backyard flocks--and not
related to chicken consumption at all. Chicken consumption
accounts for 5,076 cases in the NORS data, which represent 9.7%
of all salmonellosis cases in the U.S. from 2009 to 2020. While
the industry is committed to driving this number down further,
failing to properly distinguish foodborne illness and the more-
prevalent live-bird exposures significantly overstates the
effect of chicken consumption on illness burden in the NORs
data.
---------------------------------------------------------------------------
\36\ Center for Disease Control, National Outbreak Reporting
System, Center for Disease Control, CDC.gov (2019), https://
www.cdc.gov/nors/index.html.
The IFSAC report makes clear several important limitations:
The illness estimates ``should not be interpreted as suggesting
that all foods in a category are equally likely to transmit
pathogens.'' The authors also urge ``caution'' in ``comparing
estimates across years'' as the percentages reflect a relative
contribution to illness burden, which means a category could
see its actual illness contribution decrease yet its relative
percentage increase if other categories dropped even further.
The authors expressly ``advise using these results with other
scientific data for decision-making.'' \37\ The IFSAC report
alone cannot drive scientifically based policy. Further, the
illness contribution attributed to chicken is statistically
indistinguishable from that of fruits, seeded vegetables, and
pork and is followed very closely by ``other produce.'' \38\
This statistical parity between product categories suggests
that a coordinated approach applying measured strategies
against all of these categories would have a much greater
public health impact than merely singling out one category
without addressing the other.
---------------------------------------------------------------------------
\37\ The Interagency Food Safety Analytics Collaboration, Foodborne
illness source attribution estimates from 2020 for Salmonella,
Escherichia coli O157, and Listeria monocytogenes using multi-year
outbreak surveillance data, United States, at 12 (Nov. 2022), https://
www.cdc.gov/foodsafety/ifsac/pdf/P19-2020-report-TriAgency-508.pdf.
\38\ The Interagency Food Safety Analytics Collaboration, Foodborne
illness source attribution estimates from 2020 for Salmonella,
Escherichia coli O157, and Listeria monocytogenes using multi-year
outbreak surveillance data, United States, at 8 (Nov. 2022), https://
www.cdc.gov/foodsafety/ifsac/pdf/P19-2020-report-TriAgency-508.pdf.
As previously mentioned, salmonellosis incident rates
attributed to chicken have decreased over the last decade when
per-capita chicken consumption patterns are considered. Changes
in consumption patterns are critical for assessing foodborne
illness and must be considered to properly evaluate changes in
---------------------------------------------------------------------------
illness rates or the significance of source attribution.
If FoodNet Fast, NORS, and IFSAC data were reflective of
consumption patterns of chicken over time, the overall burden
of illness attributed to chicken would actually have decreased.
FSIS has also left unaddressed whether the Proposed
Framework would make an impact on the Healthy People 2030
goals, and if so, what impact would be anticipated and how it
would be determined.
In light of these substantial data gaps, it is essential that FSIS
prioritize generating and making publicly-available key data before
continuing further in this process. The Agency is currently working
towards the development of two quantitative risk assessments--one
focused on Salmonella in chicken and the other focused on Salmonella in
turkey. In the July 1, 2022, Constituent Update, FSIS announced that it
has signed a cooperative agreement with the University of Maryland's
Joint Institute for Food Safety and Applied Nutrition (JIFSAN) in
partnership with EpiX Analytics to help in the Agency's data collection
effort for these risk assessments. NCC has engaged with JIFSAN
routinely since July 2022 to understand this group's approach to data
collection, the specific data needs, and how NCC and our member
companies can aid in this process. Unfortunately, FSIS only provided
the JIFSAN team 3 months to work with trade associations like NCC to
understand data needs, develop a platform by which data could be
shared, and fully understand the goals of the Agency. This timeline has
proven to be insufficient as we are approaching the end of 2022 and
this group, in conjunction with several trade associations, industry
representatives, and FSIS, has still not been able to execute the
intended data collection effort.
Although the process has not progressed as quickly as FSIS seemed
to expect, NCC believes that the approach to formalize two risk
assessments is appropriate. Moreover, we support the risk management
questions that the risk assessments intend to address including:
1. What public health impact (change in illnesses, hospitalizations,
and deaths) is achieved by eliminating a proportion of
chicken (or turkey) at receiving contaminated with specific
levels of Salmonella and/or specific Salmonella subtypes?
2. What is the public health impact (change in illnesses,
hospitalizations, and deaths) achieved by eliminating final
product contaminated with specific levels of Salmonella
and/or specific Salmonella subtypes?
3. What is the public health impact of monitoring/enforcing process
control from re-hang to post-chill? Monitoring could
include analytes such as Enterobacteriaceae, Aerobic Plate
Count, or other indicator organisms, analysis could include
presence/absence or levels and the monitoring could also
include variability of actual result versus expected
result, log reduction, absolute sample result, or other
individual establishment specific criteria.
4. What is the public health impact of implementing combinations of
the risk management options listed above?
As stated in the July 1, 2022, Constituent Update, ``These risk
management questions reflect the information needed to evaluate and
compare the public health benefits of policy options for controlling
Salmonella in poultry.'' The Agency went on to state that the risk
assessments would undergo an independent peer review and be released
publicly once completed. To reiterate, NCC fully supports the
completion of and the independent peer review of both risk assessments.
NCC believes that it is imperative that any policy changes rely on the
results of the risk assessments and without that information, it is
impossible to understand what regulatory changes, if any, would impact
public health. It also makes it very challenging for the regulated
industry to provide meaningful comments with this information lacking,
and the Agency has not disclosed their sources of data used to develop
the Proposed Framework. Without the completion, peer review, and
publication of the two risk assessments, the Agency risks operating
without the benefit of a robust record, undermining informed decision
making.
Finally, there are two national advisory committees whose
recommendations may influence the content of the Proposed Framework:
the National Advisory Committee on the Microbiological Criteria for
Foods (NACMCF) and the National Advisory Committee on Meat and Poultry
Inspection (NACMPI). Charges of both advisory committees include a
focus on Salmonella in poultry among other topics. We encourage FSIS to
update its thinking on the Proposed Framework in light of many of the
recommendations by these advisory committees.
Data Recommendations
Given the critical role data plays in public health decisions, NCC
provides the following data recommendations:
1. Complete the two risk assessment studies, submit them for peer
review, and release them for public review once complete.
2. Use the risk assessment results to inform further development of
the Proposed Framework.
3. Provide the public a detailed report with the data, information,
and scientific analysis supporting the key elements of the
Proposed Framework and provide an opportunity for public
comment on the Proposed Framework based on the report.
4. Consider key NACMCF and NACMPI recommendations as they may apply
to the Proposed Framework.
5. Hold technical meetings with stakeholders to discuss in detail
the changes and complications that would be raised by any
aspect of the Proposed Framework being contemplated. These
should be made part of the administrative record in any
subsequent rulemaking, and they should be held before any
rulemaking is initiated to facilitate open dialogue.
Feedback on Component 1--Incoming Flock Testing
NCC has significant concerns that Component 1 of the Proposed
Framework exceeds FSIS's authorities, is not supported by data, would
be impractical, and is unnecessary. We suggest alternative approaches
that will better achieve FSIS's objectives within the confines of law
and reality.
Component 1 would have FSIS mandate on-farm testing, impose an
incoming flock Salmonella standard, seemingly provide FSIS inspectors
with the ability to dictate which flocks may or may not enter an
establishment, and force establishments to view Salmonella as a hazard
reasonably likely to occur (RLTO) at receiving. None of these actions
are appropriate, and they risk significantly undermining existing
policy and systems.
FSIS Lacks Authority to Regulate Farms
First, FSIS lacks jurisdiction to mandate on-farm testing, although
Component 1 would do just that. The PPIA is clear that FSIS's authority
begins at the official establishment. FSIS's primary slaughter-related
inspectional authorities are expressly limited to operations in
official establishments:
Ante mortem inspection: ``[T]he Secretary shall, where and
to the extent considered by him necessary, cause to be made by
inspectors ante mortem inspection of poultry in each official
establishment processing poultry or poultry products. . . .''
\39\
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\39\ 21 U.S.C. 455(a).
Post-mortem inspection: ``The Secretary, whenever processing
operations are being conducted, shall cause to be made by
inspectors post mortem inspection of the carcass of each bird
processed . . . in each official establishment processing such
poultry or poultry products . . . .'' \40\
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\40\ 21 U.S.C. 455(b).
Sanitary practices: ``Each official establishment
slaughtering poultry or processing poultry products . . . or
otherwise subject to inspection under this chapter shall have
such premises, facilities, and equipment, and be operated in
accordance with such sanitary practices, as are required by
regulations promulgated by the Secretary for the purposes of
preventing the entry into . . . commerce, of poultry products
which are adulterated.'' \41\
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\41\ 21 U.S.C. 456(a).
General compliance: ``No establishment processing poultry or
poultry products for commerce otherwise subject to this chapter
shall process any poultry or poultry product except in
compliance with the requirements of this chapter.'' \42\
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\42\ 21 U.S.C. 459(a).
It is telling that even ante mortem inspection, which is inspection
of live birds, must occur at the official establishment. Had Congress
wished for FSIS to be able to oversee farms, Congress could have given
that authority to FSIS. Instead, Congress specifically limited FSIS's
inspectional and oversight activities to official establishments, even
for the inspection of live birds. FSIS has long agreed with this
limitation. For example, in the final rule implementing HACCP, FSIS
expressly recognized that ``FSIS does not intend nor is FSIS
authorized, to mandate production practices on the farm.'' \43\ Thus,
not only does the statute specifically limit FSIS's authority to
official establishments (and further distribution therefrom), but FSIS
also expressly recognizes this limitation in its foundational
rulemaking for the very HACCP framework that FSIS proposes using to
regulate activity on farms.
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\43\ 61 Fed. Reg. 38806, 38810 (July 25, 1996).
---------------------------------------------------------------------------
By establishing Salmonella thresholds for incoming flocks, FSIS
would require that farms take actions to prevent Salmonella levels on
flocks from exceeding the incoming threshold level. Farms would have to
figure out how to monitor Salmonella levels and would be required to
take actions to bring levels to within FSIS's target, otherwise the
flocks are of essentially no economic value. FSIS is very clear about
its intent. Component 1 is entitled, ``Requiring incoming flocks be
tested for Salmonella before entering an establishment.'' \44\ This
testing would have to occur on farms, and by the plain language of the
Proposed Framework would happen before reaching the establishment. In
other words, FSIS would be ``mandating production practices on the
farms,'' which FSIS has long recognized it may not do.
---------------------------------------------------------------------------
\44\ Salmonella Framework at 5 (emphasis added).
---------------------------------------------------------------------------
Positioning the threshold merely as a receiving criteria that
applies to the official establishment does not help because the only
way to ensure a flock meets the incoming criteria is to require a farm
to take various actions to ensure the threshold is met. No matter how
FSIS phrases the threshold, the application of a threshold would
require farms take actions, which FSIS may not do. FSIS cannot achieve
through an indirect regulation what it lacks authority to do directly.
Further, setting a Salmonella threshold for incoming flocks
necessarily implies that Salmonella above the threshold (1) renders the
incoming birds adulterated and (2) that the purported adulteration
cannot be corrected through processing. The only explanation for
prohibiting entry of flocks that test above a certain Salmonella
threshold is that the flocks would somehow irreparably adulterate any
finished product that would be produced from them. FSIS would have no
basis to arbitrarily restrict the use of flocks otherwise. But as
explained above, Salmonella does not render raw poultry adulterated,
and FSIS has presented no evidence to change this longstanding
conclusion. Moreover, by categorically prohibiting entry, FSIS is
indicating there is no means for an establishment to correct the
purported adulteration, otherwise under HACCP principles the
establishment could accept and process the product to correct the
issue. FSIS has presented no evidence to indicate that flocks with
Salmonella above a certain threshold are per se adulterated, much less
somehow irreparably so.
Additional Issues Pertaining to Component 1
Even setting aside FSIS's lack of authority to regulate on-farm
activities, Component 1 suffers from numerous other issues. First, FSIS
has presented no data to demonstrate that an incoming threshold is
necessary for an establishment to maintain process control and
sufficiently reduce Salmonella during processing; no information to
explain how a threshold would be determined or what data FSIS or an
establishment would use to do so; no data to establish that on-farm
Salmonella sampling several weeks before a flock is processed
correlates in a reliable way to actual incoming Salmonella loads at the
beginning of processing; no data to demonstrate that reducing incoming
loads would achieve any particular public health impact; and no data to
demonstrate that incoming loads require measuring for HACCP systems to
operate as designed. Without data to support such a substantial policy
shift, the Agency cannot justify its approach, nor can stakeholders
meaningfully provide informed feedback on whether the approach is
justified by or consistent with the data. Science-based policymaking
must start with data.
Second, a mandatory receiving threshold would be fundamentally
inconsistent with HACCP principles. Under HACCP, establishments, not
inspectors, make decisions about how to execute their food safety
systems. FSIS's role is to verify that the HACCP system is designed and
scientifically supported in accordance with FSIS regulations and that
the establishment is implementing the HACCP plan as intended. FSIS's
role decidedly is not to tell an establishment which flocks may be
processed, and which may not. Component 1 would wind back the food
safety clock a quarter century and reimpose a long-abandoned command
and control approach to poultry processing.
Third, Component 1's proposed requirement that establishments
declare Salmonella as a hazard RLTO at receiving is inconsistent with
HACCP principles. Under HACCP, the establishment--not FSIS--is required
to conduct its own hazard analysis, identify those hazards that are
RLTO in the process, and implement Critical Control Points (CCPs)
accordingly. If Salmonella were a hazard RLTO at receiving, it is
unclear what step would be the CCP and how an establishment would be
expected to validate that CCP.
Fourth, Component 1 is likewise inconsistent with established FSIS
inspectional approaches because FSIS cannot verify the testing. FSIS
typically must be able to verify the data used by an establishment to
support its food safety system, but it is unclear how FSIS would verify
incoming flock testing that occurred on a farm several weeks before a
flock arrived at the establishment. FSIS's proposal to conduct
verification testing at rehang is not appropriate for verifying on-farm
testing. Several weeks would have passed from the time an on-farm
sample was collected and FSIS's rehang sampling, and the microflora
would be expected to change during this time. On-farm data would likely
be collected by drag or boot swabs, which is a very different sampling
process than taking a rehang sample. More importantly, however, is that
fact that there is inconclusive evidence as to what method of on-farm
testing actually yields repeatable and defensible results.
Additionally, different enumeration technologies could yield different
results and different confidence intervals. Moreover, between the time
of on-farm testing and rehang sampling, the birds or carcasses will
have undergone multiple interventions and processing interventions that
affect Salmonella load. Even the Agency's own instructions in the Raw
Chicken Parts Sampling Program require IPP to sample eligible chicken
parts after the last intervention is applied.\45\ Simply put, rehang
samples would not correlate with on-farm samples, nor has FSIS provided
any data to demonstrate otherwise.
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\45\ FSIS, Raw Chicken Parts Sampling Program, USDA.gov (2021),
https://www.fsis.usda.gov/sites/default/files/media_file/2020-08/
10250.1-Raw-Chicken-Parts-Sampling-Program.pdf.
---------------------------------------------------------------------------
Fifth, pre-harvest sampling would impose significant burden across
the entire industry. NCC estimates that between 260,000 and 300,000
flocks were required to reach USDA's estimate for chickens processed in
2021. That would require collecting and testing between 260,000 and
300,000 samples annually, in rural locations, to comply with the
proposal, and that is assuming each flock requires only one test. This
would impose a substantial cost, pose unnecessary biosecurity risks,
and overwhelm existing laboratory capacity and supply availability.
Sixth, challenges would also complicate FSIS verification sampling.
For example, FSIS would have to collect a large number of samples to
obtain a statistically reliable measure of the Salmonella level of a
flock--one hot rehang sample would not suffice. It is doubtful FSIS has
the sampling or laboratory capacity for this. It is also not clear how
FSIS would handle outliers. For example, would the flock be evaluated
by the average load or by the highest result, and how would FSIS obtain
enough samples to have a sufficiently narrow confidence interval around
the result? And even if FSIS could obtain this information, how would
FSIS be able to meaningfully compare it to on-farm sampling conducted
weeks earlier, using different sampling and possibly test methods, and
reflecting birds before they had undergone various processing steps?
Seventh, it is unclear how FSIS would handle the inherent delay in
receiving results for its verification testing, which, especially for
enumeration, could take a significant amount of time until results are
obtained. The flock would likely have been processed, the resulting
products shipped, and perhaps even consumed well before FSIS received
its verification results. But if the purpose of rehang sampling is to
verify the establishment is properly conducing on-farm sampling and
meeting the Agency's pre-determined threshold at live receiving,
several serious logistical and practical problems arise. If FSIS is
framing the proposed live receiving threshold as an acceptance
criterion, with the implication being that a flock whose verification
sampling exceeds the threshold should be rejected, then typically the
establishment would be expected to hold the flock pending the results
of FSIS's verification sampling. But holding an entire flock's worth of
production every time FSIS conducted verification sampling would be
extraordinarily burdensome and in effect impossible for most
establishments. But if the establishment were allowed to ship the
product before FSIS received the rehang verification results, it is
unclear how the establishment would be able to implement corrective
action. And it is entirely unclear how FSIS would view a situation in
which the FSIS rehang verification sample was above the live receiving
``threshold'' yet the product from that flock met an enforceable
finished product standard.
Additional logistical and practical problems abound. For example:
It is unclear at what time period a flock would be required
to be tested, how that would be determined, whether it would
vary for different bird types, housing conditions, farm
location, and market weight of the flock, among many other
compounding factors.
It is unclear what test method should be used for on-farm
testing, as different methods might yield different types of
results.
Mandating such a high volume of on-farm testing could pose
significant logistical difficulties in getting supplies and
samples, especially to and from remote rural areas.
It is entirely unclear what on-farm testing strategies would
best reflect the load (or, if used, serotypes) actually
entering the plant. Substantial industry testing has shown this
is very difficult to do, and FSIS has provided no data on this
point.
How would issues such as testing delays, lost samples,
equivocal results, or lab error resulting in a flock not having
an on-farm test result be handled? A flock cannot be held past
its target catch date without risking serious bird welfare
issues.
FSIS has not addressed what would happen to a flock that tested
above threshold. FSIS's contemplated policy could have catastrophic
bird welfare outcomes and could result in flocks being needlessly held,
delayed, diverted, or euthanized. Likewise, the proposal risks imposing
substantial financial losses on the family farmers who raise the
majority of broiler chickens and now might be left with flocks that
cannot be brought to market and processed.
At bottom, FSIS's contemplated proposal would introduce a
tremendous number of challenges and would be inconsistent with
established HACCP principles. The reality is that the industry already
implements numerous preharvest intervention strategies to reduce
Salmonella loads coming into establishments, and they have done so even
though they are not required to. For example, robust preharvest
Salmonella control strategies are widely implemented across the
industry to include programs in the hatchery, feed mill, breeder house,
and broiler house. These programs include, but are not limited to:
Biosecurity programs
Equipment sanitation
Feed treatment
Litter treatment
Water sanitation programs
Feeding of prebiotics and probiotics
Rodent/insect control
Cleanout programs
Vaccinations
The industry is already taking significant steps to address
Salmonella in preharvest. Component 1 would contribute nothing but
would impose considerable cost and complication. If FSIS's objective is
to enhance process control and drive down finished product Salmonella
levels, a much more direct and efficient approach would be to consider
an enumerated performance standard for finished products and allow
establishments to innovate and design their systems as appropriate to
meet that target.
Component 1 Recommendations
In light of the substantial legal, scientific, and practical
considerations associated with Component 1, NCC recommends the
following:
1. FSIS should not establish incoming flock thresholds.
2. If FSIS wants to better understand process control throughout the
process, from live receiving to pack-out, FSIS should
engage in more extensive exploratory rehang sampling
programs and use that data, along with FSIS data from other
sampling points, to analyze process control throughout
processing and to inform risk assessment modeling.
3. As discussed further below, FSIS should instead consider an
enumerative performance standard after a baseline and
qualitative risk assessment is performed. Establishments
should be provided the flexibility to design science-based
systems specific to their operations to meet that standard.
Feedback on Component 2--In-Process Testing
NCC is concerned that Component 2 would be too prescriptive and
could stifle food safety innovation. Component 2 would require
establishments to conduct in-process testing at specified points using
certain indicator organisms. Establishments already conduct extensive
in-process testing, and a command-and-control-style approach dictating
testing at certain points would be counterproductive.
As with other elements of the Proposed Framework, FSIS has provided
no data to explain why Component 2 is needed, what benefits Component 2
would have on food safety outcomes, or how the testing locations,
frequencies, or target organisms would be selected, among others.
Without this information, it is impossible to thoroughly evaluate
options, offer meaningful feedback, or understand whether the Agency's
proposal is a reasonable response to the data. As with the other
Components, it is critical that FSIS first develop and make available
its data and then make decisions based on that data in a transparent
manner.
As discussed above, HACCP principles dictate that establishments,
not FSIS, are to develop and implement their food safety plans,
including any process control monitoring strategies. Chicken processors
do this, and processors collect substantial volumes of data throughout
their processes. It is inappropriate to dictate specifically where an
establishment must sample, how frequently it must sample, and what it
must sample for. Doing so risks stifling innovation. An overly rigid
sampling framework will hinder innovation and technology development by
creating outsized focus on specific points and specific target
organisms. Instead, plants should be encouraged to innovate by testing
at the appropriate point for their systems, which in turn will provide
more data and more impetus to drive technological improvements. A rigid
framework also risks punishing companies whose food safety systems are
better monitored using different testing protocols than called for
under FSIS's one-size-fits-all approach. Such a company would be forced
to choose between incurring the cost of additional sampling or
implementing FSIS's less-effective approach. Similarly, a rigid
framework risks diverting limited company resources away from the most
effective sampling points to meet the regulatory sampling requirements.
None of these outcomes promote food safety.
Moreover, FSIS seems to contemplate requiring all establishments to
follow the same process control methodologies, or perhaps requiring all
establishments to meet the same process control standard. This would be
inappropriate. Each establishment must be free to monitor process
control as appropriate for their systems. FSIS has provided no data to
show that it is appropriate or even feasible to evaluate all
establishments using the same standard, especially if establishments
have different line configurations or intervention strategies relative
to FSIS-mandated sampling points. Without more information about what
FSIS means by ``requiring establishments to use the same statistical
process-control method,'' it is difficult to provide specific feedback,
but establishments need the ability to design their testing programs to
reflect their processes, and they should be evaluated on their ability
to implement their plans successfully, not against a rigid benchmark
that might not reflect their operations.
FSIS's science-based changes implemented through the New Poultry
Inspection System created the opportunity for greater science-based
decision-making by enhancing establishments' flexibility and promoting
more science-based verification activities by FSIS. Mandating that
establishments follow fixed sampling plans would be a step backward
from this more modernized approach. Instead, FSIS should be encouraging
establishments to innovate and implement tailored food safety systems.
Component 2 Recommendations
In light of these concerns, NCC makes the following
recommendations:
1. Consider specifying where, when, and how FSIS will collect
process control verification samples, and let
establishments develop their own individual sampling plans
as appropriate for their operations. This approach would
provide FSIS a consistent frame of reference but leave
establishments free to design their processes as they
determine will best promote food safety.
2. Use FSIS verification sampling results to feed into risk
assessment modeling to better understand process control
considerations.
3. Encourage individualized sampling plans and strategies for
establishments.
4. Encourage plants to utilize Statistical Process Control (SPC) by
providing detailed guidance on options for application and
key locations. This could be particularly helpful for small
and very small establishments and could be developed in
conjunction with the appropriate academic institution.
Feedback on Component 3--Enforceable Final Product Standard
NCC strongly opposes setting an enforceable finished product
standard for raw chicken. Such a standard would be legally infirm since
FSIS has provided no data to demonstrate why any standard, much less
the contemplated 1 CFU/g threshold, is scientifically appropriate.
Regardless of how implemented, an enforceable finished product standard
would impose substantial logistical and technical challenges on the
industry.
FSIS Lacks Legal Authority to Implement a Finished Product Standard for
Raw Chicken
FSIS lacks statutory authority to establish an enforceable finished
product standard for Salmonella. For a threshold-based finished product
standard to be legally enforceable, FSIS would have to determine,
through scientific data, that the substance is not an added substance,
and that the substance would ``ordinarily render [the product]
injurious to health'' at levels above the threshold. Otherwise, the
product would not be adulterated and there would be no legal mechanism
FSIS could use to enforce the standard. As explained above, Salmonella
is not an adulterant in raw chicken, a position consistently reflected
in decades of Agency policy and court decisions.
Such a cavalier proposed change to Agency policy is especially
alarming because FSIS has provided absolutely no data to support its
proposal. FSIS has provided no data, in the context of the Proposed
Framework or otherwise, to support a conclusion that Salmonella above
any threshold level would ``ordinarily render'' raw chicken injurious
to health, much less the 1 CFU/g threshold contemplated in the Proposed
Framework. Nor is NCC aware of any.
NCC is gravely concerned that FSIS has abandoned science-based
decision-making in Component 3. Sound science-based policymaking
requires first developing data and then developing policies in light of
that data. In the Proposed Framework, FSIS has gone about its decision-
making backwards. FSIS appears to have a desired outcome in mind and
has asked for data to support it. The 1 CFU/g threshold previewed in
the Proposed Framework appears entirely arbitrary. If anything, it
appears simply to be set as close to zero as possible without actually
creating a zero-tolerance standard.
FSIS has not explained why an enforceable product standard is
appropriate, why it should be set at 1 CFU/g, or why it should apply
uniformly to all raw poultry regardless of differing commercial and
consumer applications and known differences in Salmonella levels in
different types of poultry.
Just as troubling, the Proposed Framework suggests FSIS is not
interested in developing data to test its proposed threshold. For
example, FSIS has indicated it does not intend to conduct a baseline
enumeration survey, which would make it impossible to assess the
current level of Salmonella present on raw poultry and to determine the
public impacts of this or any other change. We question how FSIS can be
confident that 1 CFU/g is an appropriate threshold for a finished
product standard when FSIS does not even know what levels are actually
present on finished products today. Moreover, FSIS has indicated it is
conducting two risk assessments, but we understand the data collection
analysis to begin those risk assessments has not even begun. We fail to
understand why FSIS would, knowing that it is conducting risk
assessments to provide information addressing this very point,
nonetheless move forward and propose a specific finished product
threshold at this point. The appropriate approach would be to conduct
the risk assessments, conduct a baseline, gather and analyze any
additional data needed, and only then determine whether a finished
product standard might be appropriate and, if so, how to develop such a
standard.
Moreover, while a risk assessment is essential for projecting the
likely effect of different proposed standards on public health and
product risks, for a risk assessment to provide value, the risk must be
accurately identified, analyzed, and evaluated. A risk assessment is
but one component of the broader science-based decision-making process.
To determine the level of risk mitigation that would have a meaningful
impact on public health, the Agency must implement a comprehensive risk
analysis strategy, which must include three components: the risk
assessment itself, risk communication, and risk management. Moreover, a
risk assessment cannot itself determine whether a product is
adulterated. That standard is established in the PPIA, which as
discussed above requires demonstrating that a naturally occurring
substance renders the product ``ordinarily'' injurious to health.
Finally, we understand that FSIS may be considering applying a
potential finished product standard differently depending on the size
of the establishment. If the finished product standard is an
adulteration standard--which is the only way it could be enforceable--
the PPIA provides no such flexibility. Under the PPIA, if a product is
adulterated, the product is adulterated regardless of the size of the
establishment involved.
At bottom, the PPIA's adulteration standard for naturally occurring
substances requires a very clear scientific analysis: the substance has
to ``ordinarily'' render the product injurious to health at the
threshold level. Otherwise, by law, the product is not adulterated.
FSIS has not provided any information to support such a determination.
And without such information, it is impossible to meaningfully critique
the contemplated approach.
Component 3 Raises Myriad Unresolved Issues
Beyond the grave legal concerns, Component 3 raises numerous other
complex issues that remain unaddressed. For example, the necessary
testing technology simply does not exist. FSIS's assumption that
testing technology with sufficient throughput, sensitivity, and speed
will materialize simply because FSIS wills it is arbitrary. In fact,
FSIS's own newly approved testing technology has a LOD of Salmonella at
10 CFU/g, so it is unclear how FSIS would even evaluate compliance with
the contemplated 1 CFU/g standard. Moreover, the fact that FSIS is
unable to accurately quantify Salmonella at 1 CFU/g with its method
casts considerable doubt on how FSIS developed this proposed standard.
Moreover, raw chicken is a highly perishable product with a short
shelf life, and supply chains are not set up to hold substantial
quantities of raw chicken. But an enforceable finished product standard
would require testing and holding of enormous quantities of raw chicken
until results are received. There simply is not enough cold storage in
the country to accomplish this, and a widescale test and hold program
would significantly degrade product shelf life and quality. Companies
may be forced to destroy product or divert it to the cooking market,
which accounts for only a modest amount of chicken production and would
quickly find both demand and processing capacity outstripped. FSIS's
policy threatens to constrict the supply of raw chicken, which in turn
risks driving up food inflation and heightening food insecurity for
America's most vulnerable families.
Likewise, an ``enforceable'' final product standard implies that
FSIS would request a recall if a product were found to exceed the
standard, and it is entirely unclear how lotting would be determined
when establishing the scope of a recall. For example: Would lots be
defined on a flock-by-flock basis? What about other flocks processed
earlier or later that day? Would all chicken that contacted the same
chiller water be included in recall? How would rework and hang-backs be
handled? If parts of a day's production were sent to a different use,
would all products from that day or flock be implicated? If a specific
part, such as thighs, exceeded the standard, would that also affect
other parts made from that flock, such as breasts? What if some types
of parts exceed the standard but others do not? All of these questions,
and many more, would require careful, considered analysis. NCC is
extremely concerned that under the Proposed Framework, a single test
result could cause the recall of an extremely large amount of product.
There are much better ways to focus efforts on driving down levels of
Salmonella without raising these extremely complicated issues.
FSIS has also provided no information on how it would expect
establishments to test entire production lots of raw chicken in a
statistically meaningful way. Raw chicken is not like raw non-intact
beef, where lots can be limited to specific source materials and tested
individually. Raw chicken production lots are very large, and
Salmonella is unlikely to be uniformly distributed in a lot. As a
result, it would be necessary to collect a tremendous number of samples
to have confidence that the result is representative of the entire
production lot. A single sample would be wholly inadequate. It is
unclear if FSIS has the laboratory resources to adequately sample and
analyze finished products lots, and it would impose considerable costs
on establishments to do so. Moreover, raw poultry cannot be lotted in a
way to limit lot size for finished product testing, and there would be
no way to form lots conducive to a finished product test and hold
program. We are also concerned about establishments that implement a
less than daily (LTD) sanitation program and how those establishments
would be expected to lot product. For example, due to time and
difficulty involved, some establishments do not completely empty their
chiller systems daily and instead have validated LTD sanitation
programs in conjunction with FSIS. This facilitates efficient
operations and protects the environment by reducing water and chemical
use. The environmental impact and resources associated with losing a
LTD sanitation program would be significant and must be considered.
Further, to the extent the Agency were considering applying a
finished product standard differently based on establishment size or
conducting sampling for small or very small establishments, it is
unclear how the Agency would take the necessary number of samples and
still have remaining lab capacity to complete any verification
sampling.
In practice, a standard like that contemplated in Component 3 would
impose substantial cost on the industry, would divert tremendous
amounts of raw chicken to less-demanded cooking applications (and would
overwhelm the already saturated market for cooked chicken as well as
capacity to cook it), and ultimately would mean less chicken at higher
costs for consumers.
Component 3 Recommendations
NCC strongly opposed Component 3. FSIS lacks statutory authority to
implement it, and the proposal raises numerous insurmountable technical
issues. Instead, NCC recommends the following for enhancing Salmonella
control in raw poultry finished products:
1. Conduct an enumerative baseline for Salmonella in raw poultry,
focusing on different parts and perhaps different end-use
applications or differences between slaughter and further
processing facilities. Develop robust enumeration data for
different parts.
2. Use enumerative baseline data to inform a risk assessment model.
3. Develop an enumerative performance standard to replace the
current presence-based performance standard that is focused
on specific parts.
4. Enhance labeling and consumer education. NCC has petitioned FSIS
multiple times for more robust and modern labeling for
certain types of raw poultry, which FSIS has yet to act on.
In particular, NCC believes that an enumerative performance
standard would advance FSIS's public health goals in a much simpler and
easier-to-implement manner. History has shown that chicken processors
will make changes to meet voluntary performance standards. A properly
constructed enumerative performance standard would achieve the same
objective of driving down levels of Salmonella on finished product raw
poultry, but with a number of benefits over the proposed Component 3.
An enumerative performance standard provides the Agency and
establishments with greater flexibility; can be implemented quickly
without the need to rely on a novel application of the adulteration
standard; is more responsive to existing supply chains and distribution
practices; would not require new rapid testing technologies or complex
test and hold programs (but the existence of the program would provide
demand to spur testing innovation anyway); and would generate valuable
long-term data about Salmonella levels on finished product. We strongly
encourage FSIS to explore this pathway instead of the proposed
Component 3, and NCC stands ready to collaborate with FSIS on this
approach.
Cross-Cutting Considerations
NCC has feedback on several cross-cutting considerations related to
the Proposed Framework.
Developing a Robust Data-Sharing Mechanism is a Critical Prerequisite
Step
Throughout our comments, we have expressed concern about the lack
of data and scientific analysis supporting the Proposed Framework.
Chicken processors collected substantial quantities of data, dwarfing
that collected by FSIS through verification and exploratory sampling.
For more than a decade, NCC has sought a mechanism to facilitate
aggregate data sharing with FSIS. NCC members are interested in
developing an appropriate data-sharing process. In particular, NCC
urges FSIS to develop a data-sharing framework that is consistent with
the Freedom of Information Act exemption (b)(3), either with FSIS or a
sister agency within USDA.\46\ This data would provide FSIS with
substantially more insight into food safety systems throughout the
industry and would facilitate policy development and risk assessment
modeling.
---------------------------------------------------------------------------
\46\ 5 U.S.C. 552(b)(3).
---------------------------------------------------------------------------
Serotype and Virulence-Based Testing is Not Practical with Current
Technology
NCC supports efforts to enhance cutting-edge technologies to better
understand Salmonella risks. Advanced testing technologies such as
serotype-specific testing and virulence-based testing show great
promise but, as FSIS recognized in the Proposed Framework, will require
additional development before they can be used widely and effectively
in everyday food processing operations. We encourage FSIS to support
the continued development of and innovation with these technologies,
but they are not quick, affordable, or available enough to be used
widely in food processing operations. Moreover, we encourage FSIS to
support further research on virulence factors and how they may impact
public health.
The Proposal Risks Significant Disruption to the Industry and Threatens
Food Prices for Consumers
Many aspects of the Proposed Framework threaten to drive up costs
and cut availability of chicken. This would be an extremely unfortunate
outcome, especially in light of recent record across-the-board
inflation and the continuing food insecurity afflicting millions of
American families. Chicken is American's most affordable and most
consumed protein. It is nutritious and versatile, and it is a staple
protein for many, and critically for those families trying to make the
most out of every food dollar. Moreover, chicken makes up a significant
portion of food bank donations and purchases for Federal and state
nutrition assistance programs. Aspects of the Proposed Framework
threaten to undermine chicken availability.
For example, Component 1 would seem to contemplate entire flocks
being turned away from plants before they are even processed. This
would have devastating animal welfare implications, and it would reduce
the supply of chicken in the market, in turn driving up costs.
Likewise, a finished product standard would likely cause substantial
amounts of product to be diverted to cooking operations. However, there
is limited use and demand for precooked chicken, and that demand is
largely saturated. Moreover, there is limited capacity to actually
produce cooked chicken. Combined, these factors mean that much of the
chicken that FSIS likely anticipates would be diverted to cooking
operations would simply be destroyed, again reducing the supply of
chicken and driving up costs. It would be most unfortunate for FSIS to
choose this moment to worsen food insecurity and to drive up consumer
food prices.
Further, the family farmers who raise most of the broiler chickens
processed in the United States would be put at great financial risk if
FSIS were to subject the marketability of the flocks they raise to a
live receiving threshold. It is entirely unclear how FSIS anticipates
the threshold affecting farmers, and this change could inject
tremendous uncertainty into what has long been a prosperous way to
deploy farming capital.
Conclusion
NCC appreciates the opportunity to provide comment on FSIS's
Proposed Salmonella Framework. NCC member companies share FSIS's goal
of reducing Salmonella levels on raw chicken and, ultimately, driving
down salmonellosis cases. The chicken industry has made tremendous
advances in reducing Salmonella presence, and the industry continues to
drive down Salmonella. However, NCC has serious concerns about many
aspects of the Proposed Framework. The Proposed Framework contemplates
actions that exceed FSIS's statutory authority, that would be extremely
difficult and perhaps impossible to implement, and that are not
consistent with modern food safety approaches. Moreover, the lack of
supporting information and data makes it extremely difficult to
meaningfully evaluate and provide feedback on the Proposed Framework.
NCC is concerned that policy appears to be getting ahead of the
science.
NCC urges FSIS to instead pursue the recommendations made in these
comments. The Agency should continue to work closely with all
stakeholders through hosting technical meetings prior to the issuance
of a proposed rule to ensure the ability for two-way dialogue and the
development of the best approach forward based. These recommendations--
in particular, conducting additional data gathering and analysis,
developing an appropriate industry-agency data sharing protocol, and
developing an enumerated performance standard--would significantly
advance public health objectives while avoiding many of the
complications, uncertainties, and costs raised by the Proposed
Framework.
Please feel free to contact us with any questions regarding the
above request. Thank you for your consideration.
Respectfully submitted,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ashley B. Peterson, Ph.D.,
Senior Vice President, Scientific and Regulatory Affairs,
National Chicken Council.
Exhibit 6: NCC Petition Regarding NRTE Stuffed Chicken Breast Products
(Feb. 25, 2022)
February 25, 2022
Submitted electronically via regulations.gov
FSIS Docket Clerk,
Food Safety and Inspection Service,
U.S. Department of Agriculture,
Washington, DC
Re: Petition to Establish Regulations for the Labeling and Validated
Cooking Instructions for Not-Ready-to-Eat Stuffed Chicken
Breast Products That Appear Ready-to-Eat
Dear Docket Clerk:
The National Chicken Council (NCC) respectfully submits this
supplement updating our 2016 petition requesting that the Food Safety
and Inspection Service (FSIS) adopt regulations establishing labeling
requirements for not-ready-to-eat (NRTE) stuffed chicken breast
products that may appear ready-to-eat (RTE) and to issue a Compliance
Guideline for developing and communicating validated cooking
instructions for such products. NCC first filed this petition on May
24, 2016 (Attachment 1). This supplement updates the 2016 petition to
reflect updates in [] collective understanding of these products.
Information presented in this supplement should be read cumulatively
with our 2016 petition, except that the requested language amending
FSIS's regulations identified in our 2016 petition should be replaced
with the language provided in this supplemental letter.
NCC remains is aware that some consumers may be uncertain of the
proper handling and cooking methods for NRTE stuffed chicken breast
products that may appear RTE, and the proposed measures are necessary
to ensure proper handling and cooking of these products. FSIS has
demonstrated that adding information to labels, such as warning
statements and validated cooking instructions, is the appropriate way
to address products when the Agency believes that consumers may need
additional information to ensure they are consuming the product safely.
We agree with this approach.
NCC has long advocated for additional labeling to address consumer
confusion related to these products and has worked with its members to
develop guidelines for such labels. This labeling would clearly inform
consumers that these products are raw and require proper cooking while
providing specific and uniform instructions on how to cook the
products. NCC has drafted proposed regulatory text establishing the
language and prominence requirements that have been shown to be
effective in increasing consumer perception and understanding of
warning statements. NCC is confident that these proposed labeling
regulations would inform consumers are appropriately informed that NRTE
stuffed chicken breast products that may appear RTE are raw and must be
handled properly and cooked for safety. An FSIS Compliance Guideline on
validating cooking instructions for these products also would reinforce
these efforts by ensuring that these products are safe to consume when
cooked in accordance with the instructions provided and that cooking
instructions can be easily replicated by consumers.
Further, FSIS conducted a Food Safety Consumer Research Project
titled ``Meal Preparation Experiment on Raw Stuffed Chicken Breasts,''
which was published in September of 2020.
According to the results, consumers often do not pay attention to
safe handling instructions required by regulations, yet they are more
likely to look at the manufacturer's cooking instructions. Nearly all
participants in this study reported reading the instructions on the
package and the majority of participants believed that the product was
raw or partially cooked. Given these findings, it is of [utmost]
importance that labels are clear and provide appropriate information
and instructions on how to properly cook these products.
The National Advisory Committee on Meat and Poultry Inspection
(NACMPI) held a public meeting in September 2021 and specifically
discussed these NRTE stuffed chicken breast products that may appear
RTE. The subcommittee was charged with the following questions:
1. Given FSIS' consumer research findings and an open multi-state
Salmonella Enteritidis illness outbreak, should FSIS re-
verify that companies continue to voluntarily label these
products as raw in several places on the label and include
validated cooking instructions?
2. What, if any, actions can FSIS take to prevent and reduce
illnesses associated with the handling or consumption of
these NRTE products? For example, should FSIS:
a. Conduct exploratory sampling for pathogens and/or indicator
organisms in
these and other similar raw, stuffed or non-stuffed
partially processed
products?
b. Require establishments to apply a lethality treatment to
ensure that all
products are RTE?
c. Sample these products for Salmonella because consumers
customarily
undercook them?
d. Require establishments that produce these products to
reassess their
HACCP plans, in light of outbreak data?
e. Conduct targeted consumer outreach? If so, please provide
some ideas on
the best approaches.
The NACMPI subcommittee concluded, in summary, that FSIS should
reverify the labeling and validated cooking instructions for these
products. In addition, it was recommended that labels should include
language warning consumers not to use microwaves or air fryers if
validated cooking instructions are not provided for these methods and
cooking the product to a minimum of 165 F as measured using a meat
thermometer. Moreover, the subcommittee discussed the NCC petition
submitted in 2016 and recommended adoption of mandatory labeling
requirements for this product category and that FSIS publish a
compliance guide on validated cooking instructions for these products.
For these reasons, NCC maintains and requests that the Agency take
the following actions:
1. Conduct a rulemaking to adopt a regulation requiring that NRTE
stuffed chicken breast products that appear RTE be labeled
to clearly inform consumers that the products are raw and
how to properly handle and cook them, as proposed below;
and
2. Publish a Compliance Guideline explaining how to validate cooking
instructions for NRTE stuffed chicken breast products that
appear RTE, which incorporates NCC's ``Best Practices for
Cooking Instruction Validation for Frozen NRTE Stuffed
Chicken Breast Products.'' (Attachment 2--NCC Best
Practices.) *
---------------------------------------------------------------------------
* Editor's note: the document referred to follows as Attachment 1
to the May 24, 2016 letter, located on p. 165.
Specifically, NCC requests that FSIS amend Part 381 of Title 9 of
the Code of Federal Regulations to add a new subsection (c) to Section
---------------------------------------------------------------------------
381.125, to read as follows:
(c)(1) Definition. For purposes of this section, the term
``not-ready-to-eat (NRTE) stuffed chicken breast product that
appears ready-to-eat (RTE)'' means a non-homogenous product
that contains raw, comminuted chicken breast meat, which has
been heat-treated only to set the batter or breading but has
not received a full lethality treatment; which has an RTE
appearance such as a set or hardened breaded crust or grill
marks; and which has an inner cavity filled with ingredients,
including, but not limited to, raw vegetables, butter, cheese,
or meat. NRTE stuffed chicken breast products that appear RTE
do not include the following products, among others: par-fried
products such as chicken nuggets or chicken tenders unless they
have been stuffed; or stuffed products such as whole stuffed
chickens, or chicken thighs stuffed with stuffing and almonds,
which do not appear RTE.
(2) Product Name. Unless the product is destined to be fully
cooked or to receive a full lethality treatment at an official
establishment or at a foreign establishment certified by a
foreign government found equivalent under Section 196 of this
Part, the product name for a NRTE stuffed chicken breast
product that appears RTE must contain:
(i) the term ``raw'' as a descriptive designation;
and
(ii) an accurate description of the poultry component
(e.g., ``Raw Stuffed Chicken Breast'' or ``Raw Chicken
with Broccoli and Cheese'').
(3) Required labeling to signal the product is raw. The
principal display panel of NRTE stuffed chicken breast product
that appears RTE and is destined for household consumers (not
for hotels, restaurants, or similar institutions) must bear:
(i) the following safety statement:
``RAW PRODUCT. For food safety, cook to a
minimum internal temperature of 165 F measured
by a meat thermometer.''
(A) Such that the word ``RAW'' may be
used in lieu of the term ``RAW
PRODUCT'';
(B) With the words ``RAW'' or ``RAW
PRODUCT'' capitalized and in a minimum
type height of \1/4\"; and
(C) With the statement ``For food
safety, cook to a minimum internal
temperature of 165 F measured by a
meat thermometer'' capitalized or in a
combination of upper and lowercase
letters, with the letter height of the
capitalized letters at least \1/2\ the
height of the words ``RAW'' or ``RAW
PRODUCT''; and
(D) With the statement appearing on a
solid color background that contrasts
with the text and the portion of the
label on which it appears. Either the
text color or the background color must
be red in color, but not both.
(ii) a ``raw chicken'' icon, which must be prominent,
conspicuous, and legible; comprise at least 5% of the
principal display panel in area; contain the statement
``RAW CHICKEN'' in all capital letters; and include:
(A) The statement ``Do Not Microwave''
accompanied by an illustration of a microwave
enclosed in a red circle, square, or rectangle
with a red line across it; and
(B) The statement ``Oven Bake Only'' which
should appear written across the door of an
illustration of an oven enclosed in a green
circle, square, or rectangle; and
(C) The statement ``Do Not Air Fry'' with an
illustration of an air fryer enclosed in a red
circle, square, or rectangle with a red line
across it.
(iii) a serving suggestion notice explaining that the
label illustrates the suggested serving of the product
after baking, if the label contains an illustration of
the cooked product (e.g., ``serving suggestion after
oven baking'' or ``serving suggestion: photo shows
product after oven baking''). The serving suggestion
notice, if used, must:
(A) Appear in red, bold text with at least
\1/8\" size font height; and
(B) Appear on a solid color contrasting
background.
(4) Validated cooking instructions. The labels on NRTE
stuffed chicken breast products that appear RTE destined for
household consumers must contain validated cooking
instructions. The validated cooking instructions may appear
anywhere on the label and must contain all information
necessary to instruct consumers how to cook the product safely.
Such information shall include, at a minimum:
(i) The proper cooking method;
(ii) The endpoint temperature;
(iii) Instructions to measure the internal
temperature using a meat thermometer;
(iv) The ``Do Not Microwave'' icon with an
illustration of a microwave enclosed in a red circle,
square, or rectangle with a red line across it;
(v) The ``Oven Bake Only'' icon with an illustration
of an oven enclosed in a green circle, square, or
rectangle;
(vi) The ``Do Not Air Fry'' icon with an illustration
of an air fryer enclosed in a red circle, square, or
rectangle with a red line across it;
(vii) A website URL, QR code, or similar mechanism
that takes the consumer to a webpage or similar openly
accessible platform that includes a video demonstrating
proper cooking methods, which shall be placed near the
written cooking instructions;
(viii) The statement ``Raw Chicken--Do Not
Microwave'' in at least \3/16\" font followed by the
explanation ``to help prevent foodborne illness caused
by eating raw poultry'' in at least \1/16\" font; and
(ix) Any additional statements or illustrations, as
appropriate, to inform the consumer that the product is
raw and must be cooked in an oven to ensure product
safety.
(x) The cooking instructions and icons identified in
subparagraphs (i) through (ix) must be placed on a
solid color background in a contrasting color to the
text.
(5) Additional Validated Cooking Methods. The elements
identified in paragraphs (3)(ii)(A)-(C) and (4)(iv)-(vi) and
(4)(viii) may be modified to reflect any additional validated
cooking instructions provided on the label. For example, if a
label for an NRTE stuffed chicken breast product that appears
RTE destined for household consumers contains validated cooking
instructions for air frying, the ``Do Not Air Fry'' elements
otherwise required in paragraphs (3)(ii)(C) and (4)(vi) may be
omitted, and the element required in paragraphs (3)(ii)(B) and
(4)(v) may be modified to say ``Oven Bake or Air Fry Only.''
In conclusion, NCC believes it is necessary that the Agency adopt
these proposed regulations to require that the labels of NRTE stuffed
chicken breast products that may appear RTE adequately indicate to
consumers that these products are raw and must be prepared according to
the validated cooking instructions provided to ensure the product
safety. A corresponding FSIS Compliance Guideline incorporating NCC's
Best Practices for validating cooking instructions will also provide
industry with the guidance needed to ensure its instructions are
effective and consistent with typical consumer use. NCC believes these
requests complement the FSIS consumer research published in September
2020 and the recommendations set forth by the NACMPI Subcommittee in
September 2021.
Thank you for your consideration of this updated petition. Please
do not hesitate to contact me if I can provide any additional
information.
Respectfully submitted,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ashley B. Peterson, Ph.D.,
Senior Vice President, Scientific and Regulatory Affairs.
National Chicken Council.
cc:
Sandra Eskin, Deputy Under Secretary for Food Safety
Paul Kiecker, FSIS Administrator
Rachel Edelstein, Assistant Administrator, Office of Policy and Program
Development
Rosalyn Murphy-Jenkins, Director, Labeling and Program Delivery
Division
attachment 1--ncc 2016 petition
May 24, 2016
Submitted electronically via regulations.gov
FSIS Docket Clerk,
Food Safety and Inspection Service,
U.S. Department of Agriculture,
Washington, DC
Re: Petition to Establish Regulations for the Labeling and Validated
Cooking Instructions for Not-Ready-to-Eat Stuffed Chicken
Breast Products That Appear Ready-to-Eat
Dear Docket Clerk:
The National Chicken Council (NCC) respectfully submits this
petition requesting that the Food Safety and Inspection Service (FSIS)
adopt regulations establishing labeling requirements for not-ready-to-
eat (NRTE) stuffed chicken breast products that may appear ready-to-eat
(RTE) and to issue a Compliance Guideline for developing and
communicating validated cooking instructions for such products. NCC
increasingly is aware that some consumers may be uncertain of the
proper handling and cooking methods for NRTE stuffed chicken breast
products that may appear RTE, and the proposed measures are necessary
to ensure proper handling and cooking of these products. As evidenced
in FSIS's recent rule requiring labeling of mechanically tenderized
beef products, FSIS takes the view that adding to labels warning
statements and validated cooking instructions is the appropriate way to
address products when the Agency believes that consumers may need
additional information to ensure they are consuming the product safely.
Our request is consistent with--and indeed extends beyond--FSIS's
policy toward labeling of mechanically tenderized beef.
NCC has long advocated for additional labeling to address consumer
confusion related to these products and has worked with its members to
develop guidelines for such labels. This labeling would clearly inform
consumers that these products are raw and require proper cooking while
providing specific and uniform instructions on how to cook the
products. Drawing upon our members' insights and consumer perception
testing, we have drafted proposed regulations establishing the language
and prominence requirements that have been shown to be effective in
increasing consumer perception and understanding of warning statements.
NCC is confident that these proposed labeling regulations would make
certain that consumers are appropriately informed that NRTE stuffed
chicken breast products that may appear RTE are raw and must be handled
properly and cooked for safety. An FSIS Compliance Guideline on
validating cooking instructions for these products also will ensure
that these products are safe to consume when cooked in accordance with
the instructions provided and that cooking instructions can be easily
replicated by consumers.
I. Requested Actions
NCC requests that the Agency take the following actions:
1. Conduct a rulemaking to adopt a regulation requiring that NRTE
stuffed chicken breast products that appear RTE be labeled
to clearly inform consumers that the products are raw and
how to properly handle and cook them, as proposed below;
and
2. Publish a Compliance Guideline explaining how to validate cooking
instructions for NRTE stuffed chicken breast products that
appear RTE, which incorporates NCC's ``Best Practices for
Cooking Instruction Validation for Frozen NRTE Stuffed
Chicken Breast Products.'' (Attachment 1--NCC Best
Practices.)
The requested regulations and Compliance Guideline would work in
tandem. The regulations would require that the products bear validated
cooking instructions and establish required uniform label statements
necessary to inform consumers that the products are raw and must be
prepared according to the cooking instructions provided to ensure food
safety. The Compliance Guideline would assist industry in validating
cooking instructions to comply with the regulation and identify any
additional statements that should accompany the validated cooking
instructions to reinforce for consumers that they must cook the product
in an oven, not a microwave, to prevent foodborne illness.
Specifically, we request that FSIS amend Part 381 of Title 9 of the
Code of Federal Regulations to add a new subsection (c) to Section
381.125, to read as follows:
(c)(1) Definition. For purposes of this section, the term
``not-ready-to-eat (NRTE) stuffed chicken breast product that
appears ready-to-eat (RTE)'' means a non-homogenous product
that contains raw, comminuted chicken breast meat, which has
been heat-treated only to set the batter or breading but has
not received a full lethality treatment; which has an RTE
appearance such as a set or hardened breaded crust or grill
marks; and which has an inner cavity filled with ingredients,
including, but not limited to, raw vegetables, butter, cheese,
or meat. NRTE stuffed chicken breast products that appear RTE
do not include the following products, among others: par-fried
products such as chicken nuggets or chicken tenders unless they
have been stuffed; or stuffed products such as whole stuffed
chickens, or chicken thighs stuffed with stuffing and almonds,
which do not appear RTE.
(2) Product Name. Unless the product is destined to be fully
cooked or to receive a full lethality treatment at an official
establishment or at a foreign establishment certified by a
foreign government found equivalent under Section 196 of this
Part, the product name for a NRTE stuffed chicken breast
product that appears RTE must contain:
(i) the term ``raw'' as a descriptive designation;
and
(ii) an accurate description of the poultry component
(e.g., ``Raw Stuffed Chicken Breast'' or ``Raw Chicken
with Broccoli and Cheese'').
(3) Required labeling to signal product is raw. The principal
display panel of NRTE stuffed chicken breast product that
appears RTE and is destined for household consumers (not for
hotels, restaurants, or similar institutions) must bear:
(i) the following safety statement:
``RAW PRODUCT. For food safety, cook to a
minimum internal temperature of 165 F measured
by a meat thermometer.''
(A) such that the word ``RAW'' may be
used in lieu of the term ``RAW
PRODUCT'';
(B) with the words ``RAW'' or ``RAW
PRODUCT'' capitalized and in a minimum
type height of \1/4\"; and
(C) with the statement ``For food
safety, cook to a minimum internal
temperature of 165 F measured by a
meat thermometer'' capitalized or in a
combination of upper and lowercase
letters, with the letter height of the
capitalized letters at least \1/2\ the
height of the words ``RAW'' or ``RAW
PRODUCT'';
(ii) a ``raw chicken'' icon, which must be prominent,
conspicuous, and legible; contain the statement ``RAW
CHICKEN'' in all capital letters; and include:
(A) the statement ``Do Not Microwave'' above
an illustration of a microwave enclosed in a
circle with a line across it; and
(B) the statement ``Oven Bake Only'', which
should appear written across the door of an
illustration of an oven; and
(iii) a serving suggestion notice explaining that the
label illustrates the suggested serving of the product
after baking, if the label contains an illustration of
the cooked product (e.g., ``serving suggestion after
baking'' or ``serving suggestion: photo shows product
after oven baking'').
(4) Validated cooking instructions. The labels on NRTE
stuffed chicken breast products that appear RTE destined for
household consumers must contain validated cooking
instructions. The validated cooking instructions may appear
anywhere on the label and must contain all information
necessary to instruct consumers how to cook the product safely.
Such information shall include, at a minimum:
(i) the proper cooking method;
(ii) the endpoint temperature;
(iii) instructions to measure the internal
temperature using a meat thermometer;
(iv) the ``Do Not Microwave'' icon;
(v) the ``Oven Bake Only'' icon;
(vi) the statement ``Raw--Do Not Microwave'' in at
least \3/16\" font followed by the explanation ``to
help prevent foodborne illness caused by eating raw
poultry'' in at least \1/16\" font; and
(vii) any additional statements or illustrations, as
appropriate, to inform the consumer that the product is
raw and must be cooked in an oven to ensure product
safety.
II. Support for Requested Actions
We are becoming increasingly aware that some consumers may not know
how to properly recognize and prepare NRTE stuffed chicken breast
products that may appear RTE. NCC's proposed regulations and
corresponding Compliance Guideline would draw consumers' attention to
the fact that these products are raw and must be handled accordingly
while ensuring that cooking instructions are properly validated to
achieve lethality for food safety.
A. Need for Increased Consumer Awareness Regarding NRTE Foods that
Appear RTE
NCC member companies strive to produce safe, wholesome products for
their consumers to enjoy. As with any raw product, though, consumers
are the last line of defense in food safety. No matter how safe a
product is, improper handling or cooking may nevertheless render the
product unsafe for consumption. Ensuring consumer understanding of
proper handling and preparation methods therefore is a vital component
of preventing foodborne illness. In the ongoing endeavor to maintain
consumer awareness of food safety procedures, NRTE stuffed chicken
breast products that may appear RTE present a unique challenge.
NCC understands that some consumers currently may be uncertain of
the correct handling and cooking methods for NRTE stuffed chicken
breast products that may appear RTE, and further efforts are necessary
to ensure that all consumers appreciate the raw nature of these
products and the need to cook them for food safety. NCC understands
that the labeling, cooked appearance, and often frozen state of these
products can sometimes be confusing to consumers, who may believe that
the products are fully cooked. As a result, some consumers may only
reheat the product for aesthetics or palatability instead of cooking
the product to the internal temperature needed to destroy pathogenic
bacteria, even when the cooking instructions tell them to do so.
FSIS also is aware of this issue and, following recalls associated
with similar products, has advised manufacturers of NRTE breaded
chicken breast products that may appear RTE of the need to emphasize to
consumers that these products are not cooked.
Thus, there is consensus that clear and uniform labeling is
required to ensure consumers understand the proper handling and cooking
procedures for NRTE breaded chicken breast products that may appear
RTE.
B. Label Warnings, Statements, and Validated Cooking Instructions to
Inform Consumers and Ensure Product Safety
NCC believes that mandatory labeling and the use of validated
cooking instructions are the best options for equipping consumers to
handle and prepare these products safely. In a report to FSIS, the
National Advisory Committee on Microbiological Criteria for Foods
(NACMCF) similarly recommended that products that contain uncooked
poultry but appear cooked should explicitly state on the label that the
product contains raw poultry and must be cooked thoroughly.\1\ The
National Advisory Committee on Meat and Poultry Inspection (NACMPI)
also recently concluded that there should be mandatory label statements
for NRTE products that appear RTE and that FSIS should require these
products to bear validated cooking instructions.\2\ NACMPI also
suggested that a standard of identity for these products may be
appropriate.
---------------------------------------------------------------------------
\1\ NACMCF also recommended that such statements related to safety
information should appear on the principal display panel. NACMCF,
Response to the Questions Posed by the Food Safety and Inspection
Service Regarding Consumer Guidelines for the Safe Cooking of Poultry
Products (Mar. 2006), available at http://www.fsis.usda.gov/shared/PDF/
NACMCF_Re
port_Safe_Cooking_Poultry_032406.pdf?redirecthtt p=true.
\2\ NACMPI, Subcommittee #2 Consideration of Mandatory Labeling
Features for Certain Processed Not Ready to Eat Meat and Poultry
Products (Apr. 2016) (hereinafter ``NACMPI Report''), available at
http://www.fsis.usda.gov/wps/wcm/connect/076f154b-6744-41ef-bc27-
7282bee0d
fce/NRTELabeling.pdf?MOD=AJPERES.
---------------------------------------------------------------------------
A Federal regulation defining this category of products and
prescribing appropriate and uniform warning statements will ensure that
label statements are consistent, so as to avoid further consumer
confusion, and effective at alerting consumers to the raw nature of
these products. In addition, a mandate that these products bear
validated cooking instructions will ensure that the preparation
instructions provided on the label can achieve the necessary level of
lethality in a manner that can be replicated by consumers.
III. Explanation of Proposed Regulations and Compliance Guideline
NCC proposes to amend FSIS's existing regulation for special
handling labeling requirements at 9 CFR 381.125 to include labeling
requirements for NRTE stuffed chicken breast products that may appear
RTE. Below we describe the components of the proposed regulation and
explain how each provision will increase consumer awareness and improve
product safety. We also discuss how NCC's proposed Compliance Guideline
will elaborate upon the regulation while allowing for the flexibility
needed for this type of product category.
A. Definition of NRTE Stuffed Chicken Breast Product That Appears RTE
As noted above, the challenge of consumer awareness is limited to a
narrow category of products--NRTE stuffed chicken breast products that
may appear RTE. It therefore is necessary to define this term carefully
to ensure that it covers all products for which additional warning
statements and validated cooking instructions are needed to address
consumer confusion, but does not capture products for which this unique
safety issue does not exist.
NCC's proposed definition of ``NRTE stuffed chicken breast products
that appear RTE'' is based upon FSIS's description of these products in
Notice 15-16.\3\ This category of products contains raw, comminuted
chicken breast meat, which has been heat-treated only to set the batter
or breading, which has an RTE appearance, and which is stuffed with
ingredients such as raw vegetables, butter, cheese, meat, or other
fillings. The proposed definition is limited exclusively to retail
products because we understand that the awareness issues related to
these products do not extend to hotels, restaurants, and institutional
users, who recognize these products as being raw and are able to handle
them properly.
---------------------------------------------------------------------------
\3\ FSIS Notice 15-16, Profile Update in Establishments that
Produce Not-Read-to-Eat Stuffed Chicken Breast Products that Appear
Ready-to-Eat (Feb. 18, 2016).
---------------------------------------------------------------------------
The term ``stuffed chicken breast product'' means a product
consisting of comminuted chicken breast with an inner cavity that has
been filled with additional ingredients, thereby creating two, non-
homogenous layers with different densities. The different densities
affect thermal transfer, which may contribute to consumer challenges in
understanding how to cook these products. It does not refer to
homogenous blends or mixtures of comminuted chicken breast and other
ingredients. Thus, a comminuted chicken breast product that contains an
inner pocket filled with broccoli and cheese would fall under the
proposed definition, whereas a mixture of comminuted chicken breast,
broccoli, and cheese would not. A product ``appears RTE'' if it has not
undergone a validated lethality step, but has been battered or breaded
and then par-fried to set the crust; contains grill marks; or has been
colored to create the appearance that the product has been cooked.
NCC agrees with FSIS that this category of products includes items
such as breaded, pre-browned chicken cordon bleu, chicken Kiev, and
chicken stuffed with broccoli and cheese. NCC also agrees with FSIS's
determination that this category does not include par-fried products
such as chicken nuggets or chicken tenders unless they have been
stuffed or other types of stuffed products such as turducken, whole
stuffed chickens, or chicken thighs stuffed with stuffing and almonds,
which do not appear RTE. More generally, the term does not refer to
stuffed whole muscle cuts.
B. Required Product Name, Warnings, and Statements
The proposed regulations mandating label warning statements for
NRTE breaded chicken breast products that appear RTE will increase
consumer awareness by providing clear statements conveying that the
product is raw and must be cooked and by ensuring that this information
is sufficiently prominent for consumers to read it. NCC research
confirms that use of the proposed label statements, along with the
prescribed prominence requirements, will increase consumer
understanding that these products are raw. (Attachment 2--NCC Consumer
Perception Research.) NCC's proposal also is consistent with the
principles FSIS has identified for effective product warnings, and in
many aspects goes beyond the measures FSIS has recommended.\4\
---------------------------------------------------------------------------
\4\ E.g., FSIS, Labeling Policy Guidance: Uncooked, Breaded
Boneless Poultry Products (Jan. 2007), available at http://
www.fsis.usda.gov/wps/wcm/connect/6d7b7f70-e11b-4861-adc86f3269c3eeec/
Labeling_Policy_Guidance_Uncooked_Breaded_Boneless_Poultry_Products.pdf?
MOD=AJPERES.
---------------------------------------------------------------------------
The proposed regulations would require labels for these products to
bear the statement ``RAW PRODUCT. For food safety, cook to a minimum
internal temperature of 165 F measured by a meat thermometer.'' This
proposed statement includes the three elements FSIS has identified as
necessary to communicate effectively the proper handling and cooking
procedures for these products: (1) the term ``RAW PRODUCT'' (or
``RAW''), which reflects that the product is NRTE; (2) the specific
endpoint internal temperature of 165 F; and (3) a direction to measure
the endpoint temperature using a meat thermometer.\5\ This statement,
which must appear in all capital letters at least \1/4\" in height on
the principal display panel (PDP), will help consumers understand that
it is important for them to follow the cooking instructions provided.
---------------------------------------------------------------------------
\5\ See id.
---------------------------------------------------------------------------
The proposed regulations also would require several other
components to appear on the PDP, which NCC research has found will
reinforce the raw state of these products. First, the word ``raw''
would be required to be included as a descriptive designation in the
product name. Second, a ``raw chicken'' icon would be required to
appear on the label with corresponding ``do not microwave'' and ``oven
bake only'' illustrations. Repeating the word ``raw'' on the label, as
these requirements would achieve, is important because NCC's research
concluded that multiple placements of the word ``raw'' nearly doubles
the percentage of individuals who notice the term. The oven symbol also
reinforces the raw state of the product and how it should be cooked.
Third, the PDP must include a serving suggestion notice explaining that
the label illustrates the suggested serving of the product after baking
if the label contains an illustration of the cooked product. This
statement will prevent consumers from assuming based on the
illustration of the cooked product on the label that the product is
RTE.
In addition, the regulations would prescribe the warnings and
statements that must be included as part of the validated cooking
instructions. These required warnings and statements--a statement that
the product is raw, the minimum internal temperature, instructions to
measure the temperature using a thermometer, a warning not to microwave
the product to help prevent foodborne illness, and the ``do not
microwave'' and ``oven bake only'' illustrations--are the same or
similar to those required to appear on the PDP. This repetition of key
words and statements will help reinforce the key messages that the
product is raw and must be cooked for food safety.
Requiring that these warnings statements accompany validated
cooking instructions would be consistent with NACMPI's recommendations,
which suggested that validated cooking instructions should include a
disclaimer not to use a microwave and should make clear which steps
should be followed for safety.\6\ NCC also envisions that FSIS, through
its Compliance Guideline on validating cooking instructions, or an
establishment based on its experience, may identify additional warnings
or statements that would be appropriate to include in the validated
cooking instructions. NCC accounted for these additional statements by
requiring that the instructions include ``any additional statements or
illustrations, as appropriate, to inform the consumer that the product
is raw and must be cooked in an oven to ensure product safety.''
---------------------------------------------------------------------------
\6\ See NACMPI Report, supra note 2.
---------------------------------------------------------------------------
NCC research demonstrates that the proposed label regulations would
be successful in increasing consumer awareness that these products
contain raw poultry and must be cooked for safety. It is necessary for
FSIS to adopt these proposals via mandatory regulation, both to ensure
that products bear consistent and uniform language and display methods
that have been proven effective and to avoid inconsistent messaging
that may cause further consumer confusion.
C. Validated Cooking Instructions and Corresponding Compliance
Guideline
NCC agrees with FSIS that the cooking instructions for NRTE stuffed
chicken breast products that appear RTE must be validated, and the
proposed regulations include a requirement that the products bear
validated cooking instructions. This requirement will ensure that
labeled cooking instructions will achieve lethality.
To accompany the regulation, we request FSIS issue a Compliance
Guideline instructing industry on how to validate cooking instructions
for NRTE stuffed chicken breast products that may appear RTE,
consistent with the regulation. A corresponding Compliance Guideline
would be appropriate because it would provide establishments with firm,
clear guidance to follow to ensure cooking instructions are accurate
and consumers can replicate them effectively. Based on the Agency's
approach toward cooking instructions in other contexts, NCC proposes
that FSIS include in the regulations a general requirement to provide
validated cooking instructions while also maintaining more detailed
recommendations for validation through a Compliance Guideline. This
method has been effective in analogous situations that warranted
providing flexible general parameters for validation that could be
adapted to specific products,\7\ and NCC believes it would be
appropriate in this instance as well.
---------------------------------------------------------------------------
\7\ For example, FSIS requires that mechanically tenderized beef
bear validated cooking instructions, 9 CFR 317.2(e)(3), and the Agency
issued a separate Compliance Guideline for the validation of the
instructions. FSIS, Compliance Guideline for Validating Cooking
Instructions for Mechanically Tenderized Beef Products (2015).
Similarly, FSIS requires inspected establishments to prepare validated
Hazard Analysis and Critical Control Points (HACCP) plans, 9 CFR 417.2,
417.4, and maintains a Compliance Guideline to assist establishments in
validating their HACCP plans in compliance with the regulation. FSIS,
Compliance Guideline HACCP Systems Validation (April 2015).
---------------------------------------------------------------------------
FSIS's Compliance Guideline should incorporate NCC's Best Practices
for Cooking Instruction Validation for Frozen NRTE Stuffed Chicken
Products (``Best Practices''), which are consistent with and expand
upon FSIS's recommendations for validation.\8\ NCC agrees with FSIS
that microwave cooking may result in inconsistencies and, as described
above, supports label statements that discourage consumers from
microwaving these products.\9\ Because NCC discourages microwave
preparation, our Best Practices are limited to validating cooking
instructions for oven preparation, and are further limited to gas and
electric-style ovens for retail portions. Like FSIS's recommendations,
the Best Practices also state that validated cooking instructions must
result in all product sizes and varieties reaching an internal
temperature of 165 F and must be consistent with consumer use.
---------------------------------------------------------------------------
\8\ FSIS, Information on Validation of Labeled Cooking Instructions
for Products Containing Raw orPartially Cooked Poultry, available at
http://1.usa.gov/23JFeIe.
\9\ NCC would encourage FSIS to revisit this issue should a new
cooking technology become available that allows consumers to safely
cook these products using an appliance other than an oven.
---------------------------------------------------------------------------
NCC's Best Practices include a number of other suggestions beyond
FSIS's recommendations that will improve the specificity of cooking
instructions and increase the ease in which consumers can replicate the
preparation methods. In particular, the Best Practices advise that
cooking instructions for each product should include guidance for the
appropriate metal cooking utensil to support consistent cooking
results, appropriate product spacing to support even heating of the
product, and the standard placement of the product in the oven, all of
which should be validated accordingly. To maximize the efficacy and
repeatability of the validation process, NCC also recommends that
product and testing ovens be prepared for cooking and validation in a
manner that is consistent with consumer use.
NCC's request that FSIS issue a Compliance Guideline incorporating
NCC's Best Practices for cooking instruction validation goes hand-in-
hand with our proposed label regulations for NRTE stuffed chicken
breast products that appear RTE. Industry must alert consumers to the
raw state of these products and instruct consumers on the proper method
for preparing the products to achieve lethality. An FSIS Compliance
Guideline adopting NCC's Best Practices will not only ensure that the
cooking instructions provided achieve the necessary level of lethality,
but also that they are understandable and easily replicable by
consumers.
Conclusion
For these reasons, NCC believes it is necessary that the Agency
adopt these proposed regulations to require that the labels of NRTE
stuffed chicken breast products that may appear RTE adequately indicate
to consumers that these products are raw and must be prepared according
to the validated cooking instructions provided to ensure the product
safety. A corresponding FSIS Compliance Guideline incorporating NCC's
Best Practices for validating cooking instructions also will provide
industry with the guidance needed to ensure its instructions are
effective and consistent with typical consumer use. If adopted, NCC's
proposals will reinforce the safety of these popular consumer products.
Thank you for your consideration of this petition. Please do not
hesitate to contact me if I can provide any additional information.
Respectfully submitted,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Michael J. Brown,
President.
cc:
Mr. Alfred Almanza, Deputy Under Secretary for Food Safety
Daniel L. Engeljohn, Ph.D., Assistant Administrator, Office of Policy
and Program Development
Rosalyn Murphy-Jenkins, Director, Labeling and Program Delivery
Division
attachment 1--best practices for cooking instruction validation for
frozen nrte stuffed chicken products
Introduction:
An industry group was formed to identify and develop a document of
recommended Best Practices for the validation of cooking instructions
and labeling for products that are classified as ``frozen not-ready-to-
eat (NRTE) stuffed poultry that appears ready-to-eat (RTE)''.
This Best Practices document is meant to serve as a set of
voluntary guidelines which may be used by industry to develop company-
specific cooking validation programs. These guidelines were developed
to include procedures that companies can consider adopting to ensure
product safety and quality. The following recommended Best Practices
apply exclusively to frozen NRTE stuffed chicken products.
Cooking Validation Protocols:
Manufacturers of frozen NRTE stuffed chicken products design a
variety of entrees to appeal to the varying tastes of their consumers,
and, as a result, there may be differences in how to properly cook
these products. The manufacturers of these products believe that it is
in the best interest of the industry to develop some general parameters
for developing cooking validation protocols for each product to ensure
high food safety and quality.
The following voluntary guidelines are intended to be used to
develop thorough cooking validation measures exclusively for frozen
NRTE stuffed chicken products.
General Parameters:
1. Cooking instructions should be developed for each size and
variety of stuffed entree product. Each variety and size
should be validated in portion sets consistent with or
greater than package labeling for the tested product (e.g.,
2, 4, 6, etc. portions).
2. Cooking validations should be done with sufficient replication to
account for variability of cooking and to ensure
consistency of product temperature and quality.
3. Retail portions should be cooked in a retail gas or electric
style oven, as these appliances will be used by the
consumers.
4. Each portion must reach an internal temperature of 165 F at each
point measured on the product to be considered effectively
cooked.
a. Product mapping should be carried out to identify the
location(s) of the
lowest product temperature after being cooked (e.g.,
top center, middle
center, or bottom center).
5. During the validation procedure, the average operating
temperature of the oven used should be at or below target
temperature indicated on cooking instructions for the
replica set to allow for the safest development of cooking
instructions for the consumer.
6. Cooking instructions for each product should include, but is not
limited to, guidance for:
a. The appropriate metal cooking utensil (e.g., metal baking
pan, tray, or
sheet) for the given product to support consistent
cooking results. The
cooking utensil used should be the specified utensil on
the packaging in-
structions for the product, and should be validated
accordingly.
b. The appropriate product spacing on the specified cooking
utensil to sup-
port even heating of the product. Information on
spacing must be on the
packaging instructions for the product and that spacing
should be vali-
dated accordingly.
c. The standard placement of the product in the oven is on the
center rack.
Products should be validated following this standard.
Equipment/Utensils:
The use of the following cooking equipment and utensils is
recommended for optimal product cooking validation and consistency:
1. Two thermometers: one thermometer will measure the internal
temperature of the testing oven, and one will measure
predetermined points on each product portion. These should
be calibrated on the same day as the cooking validation
testing.
2. Data loggers, if used, can track temperature measurements taken
throughout cooking validation testing. These should be
calibrated and certified based on National Institute of
Standards and Technology (NIST) standards within 1 year of
testing.
3. Scales for weighing each product portion. These should be
calibrated on the same day as cooking validation testing.
4. The metal cooking utensil (e.g., metal baking pan, tray, or
sheet) recommended on the package cooking instructions for
each product should be used during the validation process
to ensure optimal product cooking consistency and
completeness.
Oven Preparation:
Testing ovens should be prepared for cooking validation in a manner
that is consistent with consumer use and which will maximize the
efficacy and repeatability of the validation process:
1. Personnel should ensure that the rack intended to be used for
cooking validation is positioned in the middle of the
testing oven. The center rack of the oven has been
determined to be the easiest location for the consumer to
use while providing the maximum available heat distribution
for the product.
2. The testing oven should be pre-heated to the set point specified
by the product cooking instructions, which will be based on
the size, quantity, and variety of product to be tested.
3. The testing oven should be pre-heated using a calibrated
thermometer or using a data logger to observe that the oven
has reached the specific set point indicated in the package
cooking instructions prior to cooking validation.
Product Preparation:
It is important to prepare the product in a way that will be
consistent with consumer use and which will maximize the efficacy and
repeatability of the cooking validation process. The following
guidelines are suggested to ensure accurate cooking validation results:
1. Each product portion must be 55 F prior to cooking to ensure
consistency of cooking validation results and testing
parameters. This should be verified prior to cooking
validation testing by measuring the temperature of each
product portion or confirming a documented correlation of
product portion temperature to the freezer storage
temperature.
2. Product must be verified to be within design specifications at
the production plant. If a company determines a product to
be out of design specification in the production plant, the
company will take appropriate steps to apply alternative
validated cooking instructions to the product that is out
of design specification.
3. Each portion should be placed on a metal cooking utensil (e.g.,
metal baking pan, tray, or sheet) with predetermined
spacing provided between each portion consistent with
packaging instructions for the product.
4. The product portions should be placed in the preheated oven as
soon as possible after the product has been removed from
the freezer and the metrics have been documented to prevent
tempering during the preparation process.
Product Cooking:
It is important that product cooking during testing reflects the
instructions that are supplied to the consumer for use. The following
are general Best Practices for cooking NRTE products:
1. The minimum required cooking time and temperature should be
determined for each labeled portion size.
2. The product portions should be placed on the center rack in the
middle of the oven to allow for adequate and even heating
of each product portion. This is the location that is
recommended to consumers when cooking frozen NRTE stuffed
chicken products.
3. The product portions will be appropriately spaced on the metal
cooking utensil in accordance with the cooking instructions
provided with the NRTE product.
Oven Monitoring:
The internal temperatures of retail gas and electric ovens may
fluctuate during a typical cooking test, and this can impact the
consistency of cooking validation results and the quality of the
product that the customer obtains when following cooking instructions
provided with a given product. It is, therefore, important to recognize
and account for this variation by following the basic suggestions
below:
1. The internal temperatures of the testing oven should be monitored
and recorded during the cooking cycle utilizing a
calibrated thermometer and/or a calibrated data logger at
the following suggested time points:
a. At the start of each cooking cycle after the product is
loaded and timer
is started
b. At least every 5 minutes during the cooking cycle
c. At the end of the cooking cycle, immediately before removing
product
2. Once preheated, data points from the oven should be assessed and
compared to set temperature points to determine:
a. Minimum oven operating temperature
b. Maximum oven operating temperature
c. Average oven operating temperature
3. Across the chosen number of replication sets per cooking
validation, the average set point of theoven must not
exceed the set point temperature in the package cooking
instructions.
Product Validation:
Validation of the recommended cooking process is an important step
to ensure food quality and safety, and also ensure that the
instructions supplied with the product will provide a consistently
positive result. Steps to validate the efficacy of the cooking process
must include, but are not limited to, the following:
1. The product portion should be temperature mapped to identify the
coldest temperature point on the product.
2. The internal temperature of each product portion should be
measured as soon as possible after removing the products
from the testing oven.
3. The temperature of each product portion should be measured at the
coldest spot(s) of each portion, as determined by product
temperature mapping, to ensure that the portion temperature
is greater than or equal to 165 F.
4. The internal minimum, maximum, and average temperatures of the
oven should be measured and recorded for each cooking
validation replicate.
attachment 2--ncc consumer perception research
NCC Packaging Consumer Comprehension of NRTE Stuffed Breasts
Objectives:
Consumer Safety
Comprehension of ``raw'' product state
Proper handling and cooking
Background:
December 2008 present recommended standard to USDA
May 2009 present next round continuous improvements
Research of Consumer Comprehension of NRTE Stuffed Breasts Product
State and Proper Handling/Cooking
On-line Omnibus 1,000 interviews
50% of sample viewed ``generic old copy'' March 2008
packaging
50% of sample viewed ``generic new'' proposed standard
Appendix: Product Tested--Old Copy
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Appendix: Product Tested--New Copy
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Package research Executive Summary
The new package communicates the raw product state significantly
better
Recall of the word ``raw'' nearly doubles (42% w/old pack to
82% w/new pack)
Understanding of the raw product state increases from 55% to
76% overall
Among females who indicate they are the primary meal
preparer, it goes from 54% to 82%
The oven symbol does a good job in reinforcing the raw state of the
product and how it should be cooked
In both the new and old versions the vast majority of consumers
plan to cook the product in the oven (75% for old copy vs. 79% for new
copy)
Open end playback of packaging likes are consistent with the
other findings--more mention raw and must be cooked in oven/not
microwavable with the new package
Recall of a meat thermometer increases significantly overall
(from 53% to 70%)
The open ends suggest meat thermometer communicates
that the product must reach a certain temperature/be cooked
well or thoroughly--but not necessarily that the product is
raw
Product State--Did you notice the word ``Raw?''
Multiple placements of the word ``raw'' nearly double the
percentage of consumers who notice the word
The percentage is higher among females compared to males
----------------------------------------------------------------------------------------------------------------
Total Total Females Total Males Total Females + Total Females +
-------------------------------------------------------- Involved In Involved + Buy
Purchase/Prep Chicken Breasts
Old A New B Old C New D Old E New F -----------------------------------
(499) (501) (257) (263) (243) (237) Old G New H Old I New J
(237) (247) (157) (167)
----------------------------------------------------------------------------------------------------------------
Yes 42 882 A0 40 885 C0 44 878 E0 40 885 G0 45 887 I0
No 58 B 18 60 D 15 56 F 22 60 H 15 55 J 13
----------------------------------------------------------------------------------------------------------------
Q 10: ``When you first saw the package, did you notice the word `Raw' to describe the product?''
CAPITAL LETTER indicates 95% confidence level vs. other column
Lower case indicates 90% confidence level vs. other column
Product State--What is the product state?
New packaging copy has significant impact on the percentage
of all consumers who believe the chicken is raw, especially
among females and females involved in the category
----------------------------------------------------------------------------------------------------------------
Total Total Females Total Males Total Females + Total Females +
-------------------------------------------------------- Involved In Involved + Buy
Purchase/Prep Chicken Breasts
Old A New B Old C New D Old E New F -----------------------------------
(499) (501) (257) (263) (243) (237) Old G New H Old I New J
(237) (247) (157) (167)
----------------------------------------------------------------------------------------------------------------
The chicken is 33 B 16 31 D 12 35 F 21 32 H 12 36 J 12
already fully
cooked
The chicken is raw 55 876 A0 54 882 C0 56 870 E0 54 882 G0 55 883 I0
I am not sure if the 12 8 15 D 6 9 10 15 H 6 10 4
chicken
is raw or fully
cooked
----------------------------------------------------------------------------------------------------------------
Q4: ``Based on what you noticed from the packaging, please select one statement below that describes the chicken
in this product''
CAPITAL LETTER indicates 95% confidence level vs. other column
Lower case indicates 90% confidence level vs. other column
Product State--Did anything call your attention to raw state and what
appliance should be used?
The oven symbol does a good job in reinforcing the raw state
of the product and how it should be cooked, increasing
recognition by over 30 points
----------------------------------------------------------------------------------------------------------------
Total Total Females Total Males Total Females + Total Females +
-------------------------------------------------------- Involved In Involved + Buy
Purchase/Prep Chicken Breasts
Old A New B Old C New D Old E New F -----------------------------------
(499) (501) (257) (263) (243) (237) Old G New H Old I New J
(237) (247) (157) (167)
----------------------------------------------------------------------------------------------------------------
Yes 44 876 A0 46 880 C0 42 873 E0 46 880 G0 48 885 I0
No 56 B 24 55 D 21 58 F 28 54 H 20 52 J 15
----------------------------------------------------------------------------------------------------------------
Q 11: ``When you first saw the front of the package, did you see anything calling your attention to the raw
state of the product and what appliances [should] be used to cook the product?''
CAPITAL LETTER indicates 95% confidence level vs. other column
Lower case indicates 90% confidence level vs. other column
Cooking Method--Proper preparation method
The vast majority of consumers will bake the product in the
oven
----------------------------------------------------------------------------------------------------------------
Total Total Females Total Males Total Females + Total Females +
-------------------------------------------------------- Involved In Involved + Buy
Purchase/Prep Chicken Breasts
Old A New B Old C New D Old E New F -----------------------------------
(499) (501) (257) (263) (243) (237) Old G New H Old I New J
(237) (247) (157) (167)
----------------------------------------------------------------------------------------------------------------
Cook in oven 75 79 79 83 72 74 79 83 81 86
Heat in microwave 10 7 8 d 4 13 11 8 h 4 8 4
Cook in oven or heat 15 14 14 13 16 16 13 13 12 10
in
microwave
----------------------------------------------------------------------------------------------------------------
Q 5: ``Which statement best describes the proper preparation method(s) for this product?'' (Please select one)
CAPITAL LETTER indicates 95% confidence level vs. other column
Lower case indicates 90% confidence level vs. other column
Meat Thermometer--Notice mention of a meat thermometer?
Women are significantly more likely to notice the mention of
a meat thermometer on the new package than males
----------------------------------------------------------------------------------------------------------------
Total Total Females Total Males Total Females + Total Females +
-------------------------------------------------------- Involved In Involved + Buy
Purchase/Prep Chicken Breasts
Old A New B Old C New D Old E New F -----------------------------------
(499) (501) (257) (263) (243) (237) Old G New H Old I New J
(237) (247) (157) (167)
----------------------------------------------------------------------------------------------------------------
Yes 53 870 A0 41 876 C0 55 62 52 877 G0 53 881 I0
No 47 B 31 49 D 24 45 38 49 H 23 48 J 19
----------------------------------------------------------------------------------------------------------------
Q 13: ``Did you notice anywhere on the packaging the mention of a meat thermometer?''
CAPITAL LETTER indicates 95% confidence level vs. other column
Lower case indicates 90% confidence level vs. other column
Thermometer--Open End Responses
A meat thermometer suggests consumers must cook the product
well and/or to a certain temperature for safety reasons
It is not necessarily telegraphic that a meat thermometer
means raw
Note: We believe more respondents say they a meat
thermometer means ``raw'' for the old copy because fewer
consumers noticed a mention of the meat thermometer for that
concept (see previous page) or thought it was raw originally
----------------------------------------------------------------------------------------------------------------
Total Total Females
---------------------------------------------------------
Old A (499) New B (501) Old C (257) New D (263)
----------------------------------------------------------------------------------------------------------------
Preparation (NET) 54 50 59 55
Cook right/well/thoroughly.......................... 18 13 22 13
Cook to certain/proper temperature.................. 14 15 13 16
Cook to certain temperature for safe consumption.... 10 8 12 10
165 degrees/cook to 165 degrees..................... 8 10 7 10
Cook properly/thoroughly for safe consumption....... 4 3 4 3
Product Attributes (NET) 17 12 20 14
Raw food/meat....................................... 15 A 8 17 D 8
Need/Usage (NET) 13 19 A 13 19
Used to check temperature........................... 5 6 4 7
Check for doneness/safety........................... 3 4 6 5
Don't like/use it................................... 3 4 4 3
Convenience (NET) 6 7 6 5
----------------------------------------------------------------------------------------------------------------
Q 14: ``What does the mention of a meat thermometer mean to you about the product and its preparation? Please be
as specific as possible.''
CAPITAL LETTER indicates 95% confidence level vs. other column
Lower case indicates 90% confidence level vs. other column
Recommended Raw Packaging Guidelines
Consensus guidelines of top 4 Stuffed Breast manufacturers
Need USDA FSIS input on guidelines & how to [standardize]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Mr. Brown, thank you so much for both your
written and your oral testimony.
And now I am pleased to recognize Mr. Larew. Please begin
when you are ready.
STATEMENT OF ROBERT L. LAREW, PRESIDENT, NATIONAL FARMERS
UNION, WASHINGTON, D.C.
Mr. Larew. Thank you. Chairman Thompson, Ranking Member
Scott, and Members of the Committee, I appreciate the
opportunity to testify today.
National Farmers Union is the nation's second-largest
general farm organization, and we advocate for the economic
prosperity of family farmers, ranchers, and their communities
through education, cooperation, and legislation. As we approach
the 2023 Farm Bill, we should all work together to resolve
flawed regulations, mounting uncertainty, and inflationary
pressures.
Family farmers and ranchers are particularly vulnerable to
the effects of inflation. Supply chain disruptions due to
Russia's invasion of Ukraine, rapid shifts in demand and supply
backlogs from the pandemic, and the lingering effects of trade
disputes with China have all set the stage for rising costs for
farmers and ranchers. These inflationary pressures are
intensified by a lack of market competition in the food system.
We have few buyers and sellers to choose from. As of 2019, the
top four companies in the cattle trade controlled 85 percent of
the market. For pork, that was 67 percent, and for broiler
chickens, 53 percent. There is also heavy concentration of
markets for corn and soybean seeds, herbicides and pesticides.
For tractors and other farm machinery, just three companies
dominate the market.
With such little competition, the opportunity for market
manipulation and unfairness is greatly intensified, and this
adds to inflationary pressure. For example, we have seen price-
fixing by meat packers and poultry integrators in recent years,
with settlements totaling nearly $1 billion, and a lawsuit
alleges the big four meat packers are manipulating the market.
Major farm equipment manufacturers continue to refuse to
provide us with access to the software tools to make repairs,
and a mega-merger between Kroger and Albertson's is expected to
drive consolidation among processors, wholesalers, and
distributors. We must create fairer and more competitive
markets that drive innovation, increase choice, and decrease
input costs and boost prices for crops and livestock.
NFU believes family farmers and ranchers should be allowed
to do what we do best: sustainably produce food, feed, fiber,
and fuel. Regulations, when needed, should be science-based,
size and risk appropriate, clear, and only implemented after
thorough feedback. Unfortunately, this doesn't always happen.
For example, confusing regulations and court decisions
regarding the definitions of Waters of the U.S. have made it
difficult to comply with the Clean Water Act. Clean, safe water
is an essential natural resource we work hard to protect, and
regulators shouldn't make it so difficult for farmers to
accomplish this.
NFU is also concerned by a potential change in the
longstanding policy on labeling of crop protection products.
The change, based on a position taken by the U.S. Solicitor
General in a brief to the Supreme Court could open up the door
to an impractical patchwork of labeling requirements that
aren't science-based.
One of the greatest sources of uncertainty farmers face is
climate change. We are on the frontlines of climate change with
shifting weather patterns and increasingly severe weather
events, making farming more unpredictable and difficult. Now
more than ever leadership on climate change is essential, which
is why NFU is a proud founding member and co-chair of the Food
and Agriculture Climate Alliance. Last week, FACA released farm
bill recommendations aimed at helping us mitigate climate
change and to make the entire farm and food system more
resilient through a voluntary science- and incentive-based
approach. To address climate change, we should build on recent
investments in farm bill conservation programs and renewable
energy, the creation of USDA's partnerships for climate-smart
commodities, and passage of the Growing Climate Solutions Act
and the SUSTAINS Act.
By working together, we can overcome the challenges
presented by faulty regulations, mounting uncertainty, and
inflationary pressures. NFU recently launched the Fairness for
Farmers Campaign to shed light on the devastating impact that
monopolies and near monopolies have on family farmers,
ranchers, and their communities. That is why we are calling for
a competition title in the farm bill, which should include
provisions that improve transparency and price discovery in
cattle markets, strengthen the Packers and Stockyards Act,
ensure farmers' right to repair, reinstate mandatory country-
of-origin labeling, and ease regulatory burdens for diversified
food processing. By building fair and competitive markets, we
address inflation, improve regulations, and reduce uncertainty.
I look forward to working with you to address these challenges.
Thank you for the opportunity to be here.
[The prepared statement of Mr. Larew follows:]
Prepared Statement of Robert L. Larew, President, National Farmers
Union, Washington, D.C.
Good morning, Chairman Thompson, Ranking Member Scott, and Members
of the Committee. It is an honor to be invited as a witness before the
House Committee on Agriculture and to provide testimony on behalf of
the more than 220,000 members of National Farmers Union (NFU). Founded
in 1902, NFU is a grassroots organization that advocates on behalf of
family farmers, ranchers, and their communities, and represents members
across the country whose operations range in size, type, and production
method.
As this Committee considers the 2023 Farm Bill, hearings like this
will serve the important purpose of identifying commonalities and
points of agreement that can be brought forward in the legislative
process. This hearing can also make clear the positions of family
farmers and ranchers and other stakeholders in agriculture. The hearing
title, ``Uncertainty, Inflation, Regulations: Challenges for American
Agriculture'' sheds light on many concerns held by Farmers Union
members. I commend Chairman Thompson for bringing these topics to the
forefront at the first hearing of the House Agriculture Committee in
the 118th Congress.
Family farmers and ranchers are particularly vulnerable to the
effects of inflation, and we have felt this throughout history and
especially in the last few years. Normal trade flows were interrupted
in 2018 and 2019 because of policy disputes with our trading partners,
and those trade flows were further disrupted due to the upheaval
resulting from the COVID-19 pandemic. These seismic changes led to
diminished supplies and rapid shifts in demand as stay-at-home
directives changes our daily routines. These inflationary conditions
were compounded by macroeconomic factors, but the inflation felt today
is amplified because market power throughout the economy is
increasingly concentrated among very few firms.\1\
---------------------------------------------------------------------------
\1\ Brauning, Falk, Jose L. Fillat, and Gustavo Joaquim. 2022.
``Cost-Price Relationships in a Concentrated Economy.'' Federal Reserve
Bank of Boston Current Policy Perspectives. May 23, 2022.
---------------------------------------------------------------------------
This hearing is also timely and topical because the House
Agriculture Committee has a great opportunity in the year ahead to make
meaningful and lasting reforms through the farm bill. Family farmers
and ranchers should be allowed and empowered to do what we do best:
produce a safe and nutritious food supply for our communities. Laws,
rules, and regulations should help us do that, not hinder us. Farmers
Union members also face many emerging challenges--like climate change,
a food system that lacks resilience, and a volatile market--that need
to be directly confronted by policymakers to provide greater certainty.
Inflation
Inflation is exacerbated by consolidation and lack of competition
in the food system. Very few firms control the market for farm inputs
(such as seeds, crop protection, fertilizer, and equipment
manufacturing), processing (including livestock slaughter and
processing), food manufacturing, wholesale distribution, food service,
and grocery retail. Farmers and consumers are on either end of this
consolidated supply chain and are comparatively numerous and
decentralized. The small set of large, consolidated firms in the middle
of the supply chain wield immense market power over farmers and
consumers.\2\
---------------------------------------------------------------------------
\2\ Jonathan B. Baker, ``Market power in the U.S. economy today,''
Washington Center for Equitable Growth, March 2017. https://
equitablegrowth.org/market-power-in-the-u-s-economy-to
day/.
---------------------------------------------------------------------------
The trend toward greater consolidation of the farm and food system
has been ongoing. The four-firm concentration ratio (CR4), which
specifies the market share for the top four firms in an industry and is
a commonly used metric for illustrating market concentration, has risen
precipitously among meatpackers and poultry processors. From 1977 to
2019, the CR4 for beef packers that slaughter steers and heifers rose
from 25 to 85 percent.3, 4 For pork, the increase in CR4
from 1976 to 2019 was 33 to 67 percent.\5\ For broiler chickens, the
CR4 increase from 34 percent in 1986 to 53 percent in 2019,\6\ and as
the level of national-level industry consolidation may be lower for
broilers, concentration is often higher in localized markets.\7\
---------------------------------------------------------------------------
\3\ Cai, X., K.W. Stiegert, and S.R. Koontz, ``Oligopsony Fed
Cattle Pricing: Did Mandatory Price Reporting Increase Meatpacker
Market Power?'' Proceedings of the NCCC-134 Conference on Applied
Commodity Price Analysis, Forecasting and Market Risk Management. St.
Louis, MO. https://legacy.farmdoc.illinois.edu/nccc134/conf_2011/pdf/
confp24-11.pdf.
\4\ USDA, Agricultural Marketing Service (AMS), Packers and
Stockyards Division, ``Annual Report 2020.'' https://www.ams.usda.gov/
sites/default/files/media/PackersandStockyards
AnnualReport2020.pdf.
\5\ Clement E. Ward, ``Economics of Competition in the U.S.
Livestock Industry,'' January 2010. https://www.justice.gov/sites/
default/files/atr/legacy/2011/09/09/AGW-15639-a.pdf.
\6\ Joel Greene, ``USDA's `GIPSA Rule' on Livestock and Poultry
Marketing Practices.'' (Washington: Congressional Research Service,
2016), https://www.everycrsreport.com/files/
20160107_R41673_e1d67b445c928f46a6b23a04c38d116fdb819c93.pdf.
\7\ James M. MacDonald, ``Technology, Organization, and Financial
Performance in U.S. Broiler Production'' (USDA, Economic Research
Service, 2014), https://www.ers.usda.gov/webdocs/publications/43869/
48159_eib126.pdf?v=0.
---------------------------------------------------------------------------
Increasing consolidation and declining competition pervades other
sectors as well. As of 2015, the top four firms for corn and soybean
seeds controlled 85 percent and 76 percent of the market, respectively;
this compares to 59 percent for corn seed in 1975, and 42 percent for
soybean seed in 1988.8, 9 Four firms account for
approximately 84 percent of the global herbicide and pesticide
market,\10\ and just two companies manufacture about half of the
tractors and other essential farm machinery used by farmers.\11\ Market
share in retail grocery is also heavily consolidated, with the top four
retailers controlling approximately 65 percent of sales in 2018.\12\ As
corporate consolidation in our food system has marched steadily
forward, farmers have watched their choices decline and their market
power continue to falter.
---------------------------------------------------------------------------
\8\ Jorge Fernandez-Cornejo, ``The Seed Industry in U.S.
Agriculture: An exploration of data and information on crop seed
markets, regulation, industry structure, and research and
development,'' USDA Economic Research Service, https://
www.ers.usda.gov/webdocs/publications/42517/
13616_aib786_1_.pdf?v=3857.1.
\9\ James MacDonald, ``Mergers and Competition in Seed and
Agricultural Chemical Markets,'' USDA Economic Research Service, 2017,
https://www.ers.usda.gov/amber-waves/2017/april/mergers-and-
competition-in-seed-and-agricultural-chemical-markets/.
\10\ Claire Kelloway and Sarah Miller, ``Food and Power: Addressing
Monopolization in America's Food System,'' Open Markets Institute, May
13, 2019. https://www.openmarketsinstitute.org/publications/food-power-
addressing-monopolization-americas-food-system.
\11\ Ibid.
\12\ CBRE, ``2019 U.S. Food In Demand Series: Grocery,'' May 2019.
---------------------------------------------------------------------------
Grocery Retail
Concentration of market power among grocery retailers places
pressure throughout the rest of the food supply chain, driving further
consolidation among processors, wholesalers, and at the producer level.
It is contributing to higher prices for consumers, results in less
innovation, and fewer marketing options for family farmers and
ranchers. A proposed merger of two of the largest grocery chains,
Kroger and Albertson's, would greatly harm competition in the grocery
retail sector. The rise of national supermarket chains over the last
thirty years has decimated independent grocery stores, and between 1994
and 2019, the total number of grocery stores across the U.S. declined
by 30 percent.\13\ In December 2022, NFU joined with a coalition of
farm and consumer advocate groups to send a letter to the Federal Trade
Commission (FTC) to block this proposed merger.\14\
---------------------------------------------------------------------------
\13\ Food and Water Watch, ``The Economic Cost of Food Monopolies:
The Grocery Cartels,'' November 2021. https://
www.foodandwaterwatch.org/wp-content/uploads/2021/11/IB_2111_
FoodMonoSeries1-SUPERMARKETS.pdf.
\14\ Open Markets Institute, ``Farm, Consumer, and Antimonopoly
Groups All Urge the FTC to Oppose Kroger-Albertsons Merger,'' December
1, 2022. https://www.openmarketsinstitute.org/publications/farm-
consumer-antimonopoly-groups-all-urge-the-ftc-to-oppose-kroger-
albertsons-merger.
---------------------------------------------------------------------------
Meatpacking
Increased concentration in many sectors of agriculture, with food
processing as the most egregious example, has contributed to
bottlenecks in America's food supply chain. Just a few meatpackers,
with a few large processing facilities, process most of the livestock
that farmers and ranchers raise into the meat that we buy. Workers in
these facilities are impacted as well. In the last month, the
Department of Labor penalized one of the nation's largest food
processing contractor providers for having employed more than 100
children in highly dangerous jobs.\15\
---------------------------------------------------------------------------
\15\ U.S. Department of Labor, ``More than 100 Children Illegally
Employed in Hazardous Jobs, Federal Investigation Finds; Food
Sanitation Contractor Pays $1.5M in Penalties,'' February 17, 2023.
https://www.dol.gov/newsroom/releases/whd/whd20230217-1.
---------------------------------------------------------------------------
There have been approximately 20 settlements for price fixing by
meatpackers and poultry integrators since 2018, totaling nearly $900
million in penalties.\16\ A pending lawsuit against the big four
meatpackers, which alleges that the corporate giants have been working
together since 2015 to suppress the volume of cattle slaughtered,
continues to work its way through the courts, with settlements already
totaling tens of millions of dollars.\17\ During 2020 and 2021--when
most pandemic-related supply chain issues occurred--the largest meat
processing companies saw their net profit margins increase more than
300 percent.\18\
---------------------------------------------------------------------------
\16\ Data compiled by NFU--various news reports and sources.
\17\ ``Beef giant JBS to pay $52.5 million to settle price-fixing
lawsuit,'' Des Moines Register, February 4, 2022. https://
www.desmoinesregister.com/story/news/2022/02/04/jbs-settles-lawsuit-
millions-price-fixing-beef-processors-meatpacking/6664089001/.
\18\ Andrea Shalal, ``Meat packers' profit margins jumped 300%
during pandemic--White House economics team,'' Reuters, December 10,
2021. https://www.reuters.com/business/meat-packers-profit-margins-
jumped-300-during-pandemic-white-house-economics-2021-12-10.
---------------------------------------------------------------------------
Inputs
Another troubling aspect of the farm economy recently has been
input costs, particularly for fertilizers such as nitrogen, potash, and
phosphorus. Price spikes, notably in late 2021 and early 2022, were
severe and prolonged, and the threat of similar input price volatility
adds uncertainty to the farm economy.\19\ Supply chain disruptions, due
to the Russian invasion of Ukraine and lingering supply interruptions
from the pandemic, have contributed greatly to this problem.\20\
---------------------------------------------------------------------------
\19\ Kent Thiesse, ``2022 farm input costs rapidly rising,'' Farm
Progress, November 30, 2021. https://www.farmprogress.com/crop-
protection/2022-farm-input-costs-rapidly-rising.
\20\ Suzanne Jenkins, ``How the Russia-Ukraine War Helped Fuel
Record Fertilizer Prices.'' Federal Reserve Bank of St. Louis, October
4, 2022. https://www.stlouisfed.org/publications/regional-economist/
2022/oct/russia-ukraine-war-record-fertilizer-prices.
---------------------------------------------------------------------------
There are structural challenges to building a diverse and
competitive market in the fertilizer industry, as natural resources are
constrained to just a few locations. However, actions by monopolies
further reduce competition in the fertilizer market and leads to
additional price pressures and volatility. The global market for
fertilizer is dominated by just a few major players, and those
producers have abused their market power to raise prices over the
decades, which harms farmers as well as consumers.\21\ USDA has
undertaken an initiative to bring more domestic and diversified
production to the fertilizer industry, which NFU welcomes. Further
efforts should be pursued in the regulatory area to allow for greater
production of fertilizer in the U.S. to help build a stronger food
system and a more equitable marketplace.
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\21\ C. Robert Taylor and Diana L. Moss, ``The Fertilizer
Oligopoly: The Case for Global Antitrust Enforcement,'' The American
Antitrust Institute, October 4, 2013. https://
www.antitrustinstitute.org/work-product/the-fertilizer-oligopoly-the-
case-for-global-antitrust/.
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The market for crop protection products has also been susceptible
to inflationary pressures due to a lack of competition among the major
providers. In 2022, the FTC and ten state attorneys general filed a
complaint in Federal court against two major agricultural crop
protection manufacturers for using a ``pay-to-block'' scheme that
raised input prices for farmers and unfairly shut out competitors,
which stifles innovation and harms the marketplace.\22\ Furthermore,
the case holds that these companies sought to maintain their near-
monopolies over certain fungicides, herbicides, and insecticides by
paying distributors to carry fewer competing generic products. Markets
ought to be competitive and fair, so that new companies can enter the
input marketplace and drive innovation, improve service, and decrease
input prices for family farmers and ranchers.
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\22\ Federal Trade Commission, ``FTC and State Partners Sue
Pesticide Giants Syngenta and Corteva for Using Illegal Pay-to-Block
Scheme to Inflate Prices for Farmers,'' September 29, 2022. https://
www.ftc.gov/newsevents/news/press-releases/2022/09/ftc-state-partners-
sue-pesticide-giants-syngenta-corteva-using-illegal-pay-block-scheme-
inflate.
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Product Labeling
NFU supports mandatory, uniform labeling for food products
throughout the processing chain and supports the reauthorization and
full implementation of mandatory country-of-origin labeling (COOL) for
meat, poultry, and aquaculture products. Clear and accurate food labels
enable consumers to make informed purchasing decisions and allow
farmers and ranchers to differentiate their products. Importing cheaper
products from other countries and passing off premiums to local
products is depressing prices for local ranchers and undermining
consumer confidence in labels. A consolidated and uncompetitive beef
packing industry is exploiting consumers, workers, and ranchers alike.
American consumers deserve the right to choose, American cattle farmers
and ranchers deserve the right to compete for the consumers' favor in
their domestic market, and meat processing workers deserve quality
jobs.
President Biden's July 2021 Executive Order on competition included
a directive to the U.S. Department of Agriculture (USDA) to clarify
that meat may be labeled ``Product of USA'' only if the animal spent
its entire life within the U.S. Under current voluntary labeling rules,
meat can be designated a ``Product of USA'' if it is processed
domestically, but born, raised, and/or slaughtered in another country.
This misleading claim puts domestic producers at a competitive
disadvantage and prevents consumers from making fully informed
decisions about the products they buy. Truthful and accurate voluntary
labels are important to producers and helpful for consumers, but they
are not a replacement or substitute for mandatory COOL.
Right to Repair
Right to Repair is a major issue across many industries but has a
profound impact on farmers and ranchers. With only three companies
dominating the market for large farm machinery, farmers have few
choices in the marketplace. The major equipment manufacturers have long
refused to make critical repair tools fully available to farmers and
independent mechanics, leaving them no choice but to take broken
equipment to a licensed dealership. These restrictions, paired with
dramatic consolidation among dealerships across the country, lead to
inflated service prices and lengthy delays during planting and harvest
windows.
There are few alternatives for farmers who want to buy equipment
they can fix themselves. Some farmers have resorted to buying older
tractors that can be repaired without software tools.\23\ This leads to
inflated prices for older equipment and is not a long-term solution.
Family farmers are put at a great disadvantage if they are forced to
choose between the ability to independently fix their own tractor or to
reap the benefits of the technological advancements of modern
equipment.
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\23\ Adam Belz, ``For tech-weary Midwest farmers, 40-year-old
tractors now a hot commodity,'' Star Tribune, January 5, 2020. https://
www.startribune.com/for-tech-weary-midwest-farmers-40-year-old-
tractors-now-a-hot-commodity/566737082/.
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Federal legislation, like the Agricultural Right to Repair Act
introduced by Sen. Jon Tester (D-MT), would ensure that farm equipment
owners and independent mechanics have access to all the documentation,
parts, and software tools required to diagnose, repair, and maintain
modern equipment. On the state level, Right to Repair bills have been
introduced in 20 states already in 2023. On February 21, 2023, the
Colorado House of Representatives approved the Consumer Right to Repair
Agricultural Equipment Act (HB23-1011) which would require manufactures
to provide parts, software, documentation, and other tools to
independent repair providers or equipment owners and would deem failure
by manufacturers to provide such resources to be a deceptive trade
practice.\24\
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\24\ Todd Neeley, ``Colorado House Advances Repair Bill,'' DTN/
Progressive Farmer, February 21, 2023. https://www.dtnpf.com/
agriculture/web/ag/equipment/article/2023/02/21/colorados-house-passes-
bill-giving.
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Among Federal agencies, the FTC unanimously adopted a policy in
2021 to ramp up law enforcement against illegal repair restrictions. In
2022, NFU and allies filed a complaint with the FTC against John Deere
for restricting repair options. On February 13, 2023, the Department of
Justice (DOJ) filed a statement of interest in a Right to Repair
lawsuit filed against John Deere in the U.S. District Court for
Northern Illinois. The filing by DOJ urges to the court to find in
favor of the farmer-plaintiffs who allege that John Deere has
monopolized the repair service market by withholding access to the
software tools necessary to repair equipment. Also in February, NFU
supported a petition to the Environmental Protection Agency (EPA) to
enforce provisions in the Clean Air Act (CAA) that allow farmers and
ranchers to repair their own equipment.\25\ The petition, filed by
Right to Repair advocate Willie Cade, asks the court to issue a writ of
mandamus compelling the EPA to require John Deere to comply with the
CAA.\26\
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\25\ National Farmers Union, ``NFU Supports Writ of Mandamus,
Implores EPA to Enforce Right to Repair Provisions in Clean Air Act,''
February 16, 2023. https://nfu.org/2023/02/16/nfu-supports-writ-of-
mandamus-implores-epa-to-enforce-right-to-repair-provisions-in-clean-
air-act/.
\26\ Todd Neeley, ``Deere Seeks End to Right-to-Repair Case,'' DTN/
Progressive Farmer, January 24, 2023. https://www.dtnpf.com/
agriculture/web/ag/equipment/article/2023/01/24/john-deere-asks-court-
issue-ruling.
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Regulations
Family farmers and ranchers are poorly served by overly burdensome
regulations and regulatory uncertainty that can make it difficult for
them to do what they do best: to sustainably produce ample food, feed,
fiber, and fuel. Regulation, when needed, should be science-based,
size- and risk-appropriate, and should be instituted after thorough and
ample feedback from the regulated community.
Waters of the United States (WOTUS)
Clean, safe water is an essential resource that family farmers,
ranchers, and their communities depend on. Farmers and ranchers strive
to be good stewards of our nation's natural resources, including by
protecting water quality through sound land management practices.
Ambiguous or confusing regulations regarding the definition of Waters
of the United States (WOTUS) under the Clean Water Act (CWA) have made
compliance difficult and unduly burdensome.
The regulatory uncertainty created by frequently changing
definitions of WOTUS have troubled farmers for many years. NFU has
repeatedly provided input to the EPA and the Army Corps of Engineers on
their rulemakings, and we have asked the agencies to promulgate rules
that will provide a clear definition of WOTUS. NFU has also urged the
agencies to consult farmers and ranchers regularly, extensively, and
equitably and consider the legitimate concerns of family farmers and
ranchers and others who will be regulated under updated and new CWA
rules.\27\
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\27\ National Farmers Union, Re: Docket ID No. EPA-HQ-OW-2021-0602;
``Revised Definition of `Waters of the United States','' February 7,
2022. https://nfu.org/wp-content/uploads/2022/02/02-07-22-NFU-
Comments_WOTUS_EPA-HQ-OW-2021-0602.pdf.
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NFU appreciates the agencies' stated efforts to establish durable
rules that define the scope of waters protected under the CWA. Despite
a recent final rule from the agencies, an ongoing Supreme Court case on
WOTUS continues to add uncertainty to the WOTUS statutory and
regulatory regime. Ultimately, Farmers Union members wish for the
courts and agencies to balance the important goal of protecting water
quality with rules that are clear, simple, and not unduly burdensome
for farmers and ranchers.
Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)
The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)--
the primary Federal statute governing pesticides--is key to our
science-based regulatory approach to crop protection products and helps
ensure farmers can continue using these products prudently on their
farms. Thus, NFU was concerned by a recent change in long-standing
policy regarding the regulation and labeling of crop protection
products based on a position taken by the U.S. Solicitor General in a
brief to the U.S. Supreme Court.
The brief, submitted in May 2022 by Solicitor General Elizabeth
Prelogar, argues that Federal pesticide registration and labeling
requirements do not preclude states from imposing additional labeling
requirements, even if those requirements run counter to Federal
findings. The Solicitor General's brief, while focused on glyphosate,
adopts a position that could apply to any crop protection product.
Thus, the decision taken in the brief may undermine the FIFRA--and open
the door to an impractical patchwork of state pesticide labeling
requirements. We are concerned that the decision taken in the brief
could threaten producers' access to crop protection products through
state regulations that are not science-based.
Growing Climate Solutions Act
Sometimes, an unregulated marketplace without any guardrails can
hinder the growth and development of market opportunities--including
for farmers and ranchers. Insufficient access to reliable, vetted
information about carbon and other environmental credit markets for
agriculture has limited farmer participation in these markets.
Consequently, farmers may be missing out on an opportunity to generate
revenue while implementing practices that can make their farms more
resilient and mitigate climate change.
The recently enacted bipartisan, bicameral Growing Climate
Solutions Act is meant to address this problem by creating a
registration program at USDA for these environmental credit markets. By
improving transparency of these markets through USDA oversight and
reducing technical barriers to entry, farmers have a better chance of
being able to participate, and for these markets to develop to benefit
all.
Packers and Stockyards
The Packers and Stockyards Act (PSA) protects livestock and poultry
producers from unfair, deceptive, and monopolistic practices in the
marketplace. These important protections for family farmers and
ranchers have not been adequately enforced for the last few decades,
which has led to rampant consolidation in the livestock industry,
reduced transparency in the marketplace, the rise of unfair contract
terms, and depressed prices paid to farmers.
President Biden's July 2021 Executive Order on competition directed
USDA to write new rules under the PSA. Thus far, rulemakings would
require poultry companies to be more transparent with the growers with
whom they contract, and would prohibit certain prejudices,
disadvantages, discrimination, retaliation, and deceptive practices, in
livestock markets. USDA has taken further steps to bring more
transparency to the livestock market with a cattle contract library and
reporting more details about market activity. Additional rulemakings
are expected regarding the barriers farmers face to file legal
challenges under the PSA and the unfairness of poultry grower
tournament systems.
The proposed rules from USDA are sorely needed. Without strong
enforcement of the PSA, farmers and ranchers will continue to face an
unfair marketplace. NFU supports expanded and emphasized enforcement of
these and related rules, with the establishment of an independent
office focused on preventing abuses of power by corporate monopolies.
Such an office would be made possible through the enactment of the Meat
and Poultry Special Investigator Act.
The Executive Branch has taken steps to ensure that farmers who
have been harmed by abuses of market power have a voice. One example of
how this is the USDA Agricultural Marketing Service partnership with
DOJ to create the Farmer Fairness portal.\28\ This online tool makes it
easier for farmers, ranchers, and others to report potential violations
of competition laws including, but not limited to, the PSA.
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\28\ Farmer Fairness. https://www.usda.gov/farmerfairness.
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Renewable Fuel Standard
Reasoned legislative and regulatory actions can create economic
development opportunities for rural communities and family farmers and
ranchers. A prime example of this is the Renewable Fuel Standard (RFS)
program, authorized in 2005 and expanded in 2007, which is intended to
reduce greenhouse gas emissions and expand the biofuels sector.\29\ It
has been the most successful clean fuels policy in the U.S. and makes
fuel more affordable for millions of Americans, helps to generate jobs,
revives rural economies and communities, reduces oil imports, and
protects the environment by reducing air pollution. Future regulatory
actions related to the RFS should be geared towards its continued
growth and success. Higher blends of ethanol, such as E30, should be
brought into the RFS also with the use of farm-based crops for
sustainable aviation fuel. Additionally, USDA is providing $100 million
in biofuels infrastructure grants through the Higher Blends
Infrastructure Incentive Program. NFU urges Committee Members to
support the RFS and the continued growth of renewable energy in rural
America.
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\29\ Renewable Fuel Standard Program. https://www.epa.gov/
renewable-fuel-standard-program.
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Uncertainty
Climate Change
Climate change is one of the greatest challenges--and sources of
uncertainty--facing family farmers, ranchers, our communities, and
global food security. Farmers and ranchers have been feeling the
effects of climate change for many years through shifting precipitation
patterns, historic droughts, and extreme weather events. While farming
is by nature unpredictable, climate change is increasing uncertainty
and making a difficult job even harder. Farmers Union members have long
recognized that the climate is changing; that those changes are
affecting all aspects of their operations; and that if they are
provided the right tools and adequate resources, they can be a key part
of the solution by sequestering carbon in the soil, reducing greenhouse
gas emissions, and by building a more resilient and sustainable
agriculture. For decades, NFU has been a leader on the issue of climate
change and agriculture. Farmers Union has focused on raising awareness
about the effects of climate change on farmers and ranchers, while
advocating for opportunities for farmers and ranchers to be part of the
solution. We have also made sure we are regularly listening to our
members on the topic through NFU's Climate Change Policy Advisory Panel
(CCPAP).\30\
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\30\ National Farmers Union, ``Farmers Union Announces Climate
Change Policy Advisory Panel,'' December 9, 2020. https://nfu.org/2020/
12/09/farmers-union-announces-new-climate-change-policy-advisory-panel/
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Now more than ever, leadership on climate change and agriculture is
essential, which is why NFU is a proud founding member and co-chair--
along with Farm Bureau, the National Council of Farmer Cooperatives,
and the Environmental Defense Fund--of the Food and Agriculture Climate
Alliance (FACA).\31\ FACA members represent farmers, ranchers, forest
owners, manufacturers, the food industry, state governments, higher
education associations, sportsmen and sportswomen, and environmental
organizations. These organizations are dedicated to advancing climate
solutions across food and agriculture supply chains. Since formally
launching in 2020 as a group of eight organizations, FACA has grown to
a coalition of over 80 members. To address the uncertainty associated
with climate change, FACA released its initial policy recommendations
in late 2020.\32\ Several of these recommendations have become law and
others have been implemented by the Administration. Looking ahead, FACA
recently extended its consensus-based coalition work by releasing its
2023 Farm Bill recommendations.\33\
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\31\ Food and Agriculture Climate Alliance. https://
agclimatealliance.com/.
\32\ Food and Agriculture Climate Alliance, ``Food and Agriculture
Climate Alliance Joint Policy Recommendations,'' November 2020. https:/
/agclimatealliance.com/files/2020/11/faca_recom
mendations.pdf.
\33\ National Farmers Union, ``FACA Releases Farm Bill Policy
Recommendations to Support Economic Opportunities and Address Climate
Change,'' February 22, 2023. https://nfu.org/2023/02/22/faca-releases-
farm-bill-policy-recommendations-to-support-economic-opportunities-and-
address-climate-change/.
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NFU is heartened by the dedicated action taken by Congress and the
Administration in recent years. This includes the recent enactment of
significant additional funding for farm bill conservation programs, the
creation of USDA's Partnerships for Climate-Smart Commodities, and
passage of the Growing Climate Solutions Act and the SUSTAINS Act. All
these resources and actions, along with the ingenuity and commitment of
farmers and ranchers, are helping us face the uncertainty presented by
climate change.
Supply Chains
The COVID-19 pandemic exposed vulnerabilities in the agricultural
food supply chain, including bottlenecks from an outdated and aging
transportation system, ongoing labor shortages, cybersecurity threats,
and lack of competition. These vulnerabilities affect all Americans by
threatening the food system. Resolute action on climate change is also
needed to secure our supply chains.
The Biden Administration, through Executive Order 14017: America's
Supply Chains, has softened the impact of supply chain disruptions. By
lifting transportation regulatory burdens and facilitating trade of
essential agricultural food products, the uncertainty of the last few
tumultuous years has been reduced. Recent undertakings at USDA to
increase capacity at the Port of Oakland, California, eased port
congestion, increased capacity, and is improving services for shippers
of U.S. grown agricultural commodities. The supply chain Executive
Order also directed USDA to conduct a 1 year assessment of risks and
resilience of food supply chains and to identify potential solutions to
address supply chain vulnerabilities. Within that assessment, USDA's
recommendations included an objective to ``support a level playing
field to enable competition'' and ``to assure transparency and fair
competition in commodity markets and product safety in meat products.''
\34\ These regulatory actions reduce uncertainty in the supply chain
while bolstering a more competitive and resilient marketplace.
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\34\ USDA, Agricultural Marketing Service (AMS), ``Agricultural
Competition: A Plan in Support of Fair and Competitive Markets,'' May
26, 2022. https://www.ams.usda.gov/reports/agricultural-competition-
plan-support-fair-and-competitive-markets.
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Similarly, the implementation of the bipartisan Infrastructure
Investment and Jobs Act (IIJA) helps to address the pinch points in the
supply chain. Through IIJA, agriculture and livestock haulers were
given the flexibility to safely get their products to market by easing
some of the regulatory burdens of hours-of-service requirements.
Agricultural Workforce
An ongoing shortage of skilled farmworkers creates uncertainty for
family farmers, contributes to food price inflation, and makes the
entire food supply chain less secure and resilient. We must address
this workforce crisis threatening farms across the United States so our
producers can continue to feed, clothe, and fuel our nation. We need
sensible, compassionate immigration reform, including reform of the H-
2A visa program, to provide farmers and farmworkers with certainty,
lower food prices for American families, and secure our nation's food
supply.
Conclusion
Farmers Union members are committed to addressing the challenges
that this hearing is exploring. In 2021, NFU launched the Fairness for
Farmers campaign, an effort to shed light upon the devastating impact
that monopolies and near-monopolies have on family farmers and
ranchers. The campaign calls for legislative action including
diversifying marketing opportunities, improving price discovery and
transparency, antitrust enforcement, and reforming the PSA. Many of
these priorities could be addressed through the inclusion of a
competition title in the 2023 Farm Bill.
Later this week, NFU members will meet at our national convention
to set the organization's policy priorities for the coming year through
a grassroots, democratic process. The spirit by which we do our work at
Farmers Union meetings is similar to the way this Committee can work on
the farm bill. As NFU policy states, ``our spirit of cooperation must
continue to grow and not have limits. Our challenge is to take this
knowledge and spirit and incorporate it into meaningful policy through
legislation on local, state, and national levels.'' \35\ By working
together, we can ensure that family farmers and ranchers can overcome
the challenges presented by faulty regulations, mounting uncertainty,
and inflationary pressures.
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\35\ National Farmers Union, Policy of the National Farmers Union,
March 2022. https://nfu.org/wp-content/uploads/2022/03/2022-NFU-Policy-
Book_FINAL.pdf.
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Thank you for the opportunity to provide this testimony. NFU stands
ready to continue to work with the Committee to address these issues
and would be happy to answer any questions.
The Chairman. Mr. Larew, thank you so much for your
testimony. We have also received written testimony from the
National Rural Lenders Association and the J.R. Simplot
Company, and without objection, it will be inserted into the
record.
[The statements referred to are located on p. 245.]
The Chairman. And thank you all for your important
testimony today.
At this time, Members will be recognized for questions in
order of seniority, alternating between the Majority and
Minority Members and in order of arrival for those who joined
us after the hearing convened. You will be recognized for 5
minutes each in order to allow us to get to as many questions
as possible.
And I recognize myself for 5 minutes.
I am very proud of the production advancements our farmers,
ranchers, and foresters have made, thanks to science,
technology, and innovation. And to put this in a global
perspective, China and Brazil, both countries with comparable
agricultural production levels to the United States, have
increased their agriculture emissions by 86 percent over the
last 30 years, but the United States has achieved a net
decrease in agriculture emissions during that same time.
However, we have seen this Administration attack American
production agriculture and make it harder for American
producers to deliver feed, fuel, and fiber to consumers across
the globe.
Now, President Duvall, would you agree with me that true
climate-smart agriculture policies would be ones that increase
agricultural production and displace the market share of
countries like China and Brazil, countries with far less
attractive emission profiles than the United States who have
not made the same efficiency and productivity strides as we
have?
Mr. Duvall. I would 100 percent. You can't have
sustainability without having efficiencies, and doing one helps
the other. We as farmers, if you look over the last 3 decades,
have done a tremendous job in the sustainability area. And we
are doing more with less. Matter of fact, to produce the same
crop we produced last year, we would have had to have 100
million more acres cropped than 30 years ago. So that is how
efficient we have become, and that is how well we have been
sustainable.
The Chairman. One of the leadership skills that I don't
think we have--actually, I never recognized as a leadership
skill until a couple years ago, and that is storytelling. And
American agriculture has a great story to tell. So how can U.S.
agriculture do a better job of telling this story?
Mr. Duvall. Well, I think we do that every day in our
organizations. Mr. Larew, Rob down at the end, he has a great
organization. We do, too. We do that storytelling. But the best
way for our farmers to do that is open up their farm and let
your staff, you, come in and visit with them to actually let
them tell their story how the farm bill has helped them through
a disaster or through bad pricing times or whatever that might
be and through conservation. There are 140 million acres that
farmers have voluntarily signed up for conservation programs.
And if you put that in context, that is the size of California
and New York. They put their own land up voluntarily for
conservation, and they are continuing to do that for
conservation and climate-smart farming.
The Chairman. Sticking with a theme of science, technology,
and innovation, when it comes to meat and poultry processing
line speeds, it seems USDA had the same approach until
recently. Unfortunately, following a couple of lawsuits from
activist labor groups, I am afraid the Department has halted
all progress and is even considering reversing course. Mr.
Brown, do you share these concerns? And if so, is there
anything that can be done to help the Department get on track?
Mr. Brown. Well, Mr. Chairman, as you have said, science,
innovation, and technology should lead all policy decisions.
And unfortunately, on this issue, it appears USDA may have lost
its way. We have over 25 years of experience with the increased
line speeds that was begun under the HIMP (HACCP-Based
Inspection Models Project) Program. Over the duration of that
time, food safety and labor, worker safety figures have all
decreased, but the performance has increased. The food safety
profile in a line speed plant operating at the higher line
speed versus the 140 line speed is equal or better than the
other plants.
Our concern is that we have 25 years of history, 25 years
of data, 25 years of experience with industry and government
working together. You have all the statistics at hand. Do the
math. Add it up USDA, and let's move forward. But no, we bring
in a new study, a group of folks not necessarily friendly to
the industry from an institution in California. And now we are
going to go through all those statistics again. I don't know
what to expect, but I do know we have a long history of
success.
And finally, I would like to add the rest of the world
operates up to at least 30 percent higher than us. My Chairman
was in Germany last week, 220 birds a minute. Okay? How does
that stack up against 140 and 175? Canada, as was mentioned
earlier, much higher speeds. So we would like to work with the
Committee to break through this, do the math, and move forward.
The Chairman. Well, thank you very much. That is my time. I
am now pleased to recognize the gentleman from Georgia, my good
friend and Ranking Member for 5 minutes, Congressman Scott.
Mr. David Scott of Georgia. Thank you very much, Mr.
Chairman.
My first question is to my good friends Mr. Zippy Duvall
and Mr. Rob Larew. Now, during our last Congress, we worked
hard to alleviate many of the problems we are still addressing
today. In the Lower Food and Fuel Costs Act (H.R. 7606, 117th
Congress), we expanded producers' access to precision ag,
nutrient management tools. We improved the meat processing
capacity, expanded domestic biofuels production, we reduced
supply chain bottlenecks, and the Inflation Reduction Act. We
injected $20 billion into farm bill conservation programs, $5
billion into forestry, over $13 billion into rural development.
So Mr. Duvall, Mr. Larew, how can we build on this work?
What must we do to improve marketing opportunities and increase
the profitability of our farmers? What must we do? Mr. Duvall,
you are first.
Mr. Duvall. I think we have to continue the work that
Secretary Vilsack has done through his commodity climate-smart
projects and get that information and data back in from his
pilot programs to see what leads us into the future. We also
have to make sure that we continue to fund research and
development dollars. You got to understand, research and
development dollars makes us more sustainable by keeping us
more efficient and more competitive. And without those dollars,
with other countries outspending us in that area, we could get
behind. So those are two areas.
But we have to make sure that we focused--and Mr. Larew
mentioned that they were a proud member of FACA, Food and
Agriculture Climate Alliance. We are also a member of that. He
and I serve on that committee together. And we need to make
sure that anything that goes forward is voluntary, market-
based, and science-driven. And if that is true, then our
farmers will voluntarily step up and do the right thing like
they always have done.
Mr. David Scott of Georgia. Good point there. And now, Mr.
Larew, your thoughts?
Mr. Larew. Yes, I would echo a lot of what has already been
said but then would add that really a lot of the investments
that have been made are all about market diversification and
making sure that there are greater market opportunities for
farmers out there. And while we talk a lot about the pressures
that consolidation has brought to agriculture and to farmers
and ranchers specifically and the impact that it ultimately has
on consumers, you can't just change that overnight. You have to
develop new markets. You have to create that opportunity for
new. So investment in biofuels infrastructure is a huge thing
for those rural communities and for farmers out there for
finding other markets. The investment in more local and
regional processing is critical to make sure that that
infrastructure is there.
And so, in addition to that there are climate benefits from
each of those, and along with the climate-smart partnership
efforts that the USDA is taking right now, I think that this
will go a long way in building up that diversification that we
need, both family farmers, and ultimately, consumers.
Mr. David Scott of Georgia. Now, Mr. Larew, in your
testimony, you made an interesting point. You talked about the
tiny share of what consumers pay for food that actually goes to
the farmer. Build on that. We have to get more profitability to
our farmers. And the tiny bit of money that they are getting
after their products are sold is minuscule.
Mr. Larew. Yes. So the farmer's share of the food dollar is
something that National Farmers Union has tracked for a very
long time using USDA data. And what we have seen is an erosion
of that share of the food dollar really substantially over the
last several decades from really a period of about 50 percent
of the food dollar to now more in the neighborhood of 12 to
13 depending on the product of course. But that trend
continues across all food.
What we are seeing then in the larger trend is that farmers
are receiving less of that food share dollar. Consumers
ultimately are paying more for their product out there, and so
this is an education tool.
Mr. David Scott of Georgia. What can we do about this tiny
share?
Mr. Larew. I think part of it is this diversified market
that we are talking about doing, making sure that farmers have
more options in which to sell into. Those places where farmers
have been able to find local and regional markets, they get a
higher share of that food dollar.
Mr. David Scott of Georgia. Thank you very much.
Mr. Austin Scott of Georgia [presiding.] I now recognize
Chairman Lucas for 5 minutes.
Mr. Lucas. Mr. Chairman, I would be remiss if I didn't note
that this is my first hearing on the Committee in 4 years. It
is good to be home. It is just good to be home.
And with that, in March of 2022, the U.S. Securities
Exchange Commission proposed a rule that expanded the scope of
what climate-related information publicly traded companies must
disclose to the SEC and to their investors. One part of the
deeply flawed rule required companies to disclose various types
of emission information. First, its own direct greenhouse gas
emissions, otherwise known as Scope 1. Second, the companies
were obligated to disclose the indirect emissions from all
purchased electricity or other forms of energy, Scope 2. And
finally, serving as a catchall, it would compel the public
company to disclose the greenhouse gas emissions from all
upstream and downstream activities in its entire value chain,
so-called Scope 3 emissions.
Now, I am greatly concerned about the impact this rule will
have on farmers and ranchers who serve as the starting point
for many of these value chains. President Duvall, could you
please speak to the potential impact and cost this rule would
place on farmers and ranchers who find themselves ensnared in
this broad reporting scheme?
Mr. Duvall. It can be tremendous. I have spoken to Chairman
Gensler once and I am going to speak to him again this week
about this issue. Scope 3 would put a heavy bookkeeping burden
on our farmers. And yes, if you are a larger farmer, which is
two percent of the farming group, you may have the office space
and the specialists to be able to make that documentation. But
you take a middle-sized, small farmer like myself, that becomes
a huge burden and you have to hire someone to do it and have
consultants help you through it, so it is tremendous.
But I will tell you this. As a farmer that sells my cattle
on the free market and choose where I want to sell it to be in
a contract grower for large, vertically integrated company,
knowing that when things come down on that company, they have
to deliver it. And when they have to deliver it, they turn to
me to do it. And there is no one to help record it, there is no
one to help to pay for it. And the farmer carries that burden,
whether it be cattle or whether it be rain or whether it be
poultry. And so it is a tremendous burden, and it is something
that we need to stop before it gets started.
Mr. Lucas. Thank you, Zippy.
Mr. Rosenbusch, I will start with you, but I welcome any
insights the rest of the panel may have. Can you speak to the
impact this rule would have on publicly traded companies who
are members of your organizations?
Mr. Rosenbusch. Yes, thank you, Chairman Lucas. The impact
on publicly traded companies is one thing because a lot of them
are already reporting a lot of their ESG metrics. As a matter
of fact, we just released our sustainability report and we have
captured an increase of over 300 percent, our emissions, from
fertilizer manufacturing. So great strides have been made
there, and I will tell you that most of those manufacturers are
committed and are doing a lot of that reporting. So I think
regulatory certainty, as I mentioned, is what is critical here,
but I think a lot of the small- to medium-sized companies that
are also involved in the fertilizer supply chain are the ones
that we would be most concerned about. And then ultimately, any
of the Scope 3 emissions that Zippy referenced I think is going
to be really difficult when it comes to these fertilizer
companies that would have to report any of that up and
downstream.
Mr. Lucas. Anyone else care to comment on that? Mr. Brown?
Mr. Brown. Mr. Lucas, while I don't have a policy on that,
I will address that under the banner of regulation. In the
chicken industry alone on sustainability over the last 10
years, we have reduced land use by 13 percent, greenhouse gas
emissions by 18 percent, fossil fuel-based resources by 22
percent, and particulate-forming emissions by 22 percent, all
done without the hand of a government mandate.
Mr. Lucas. You are saying, Mr. Brown----
Mr. Brown. Knowing that and our sustainability, I would
just finish by saying eat responsibly, choose chicken.
Mr. Lucas. Clearly, it shows the industry responds. You
don't have to have an economic baseball bat. With that, I yield
back, Mr. Chairman.
Mr. Austin Scott of Georgia. The chair now recognizes Mr.
McGovern for 5 minutes.
Mr. McGovern. Well, thank you very much, and thank you all
for your testimony for being here today.
And Mr. Duvall and Mr. Larew, it is great to see you again.
Thank you very much.
So I represent a district that has over 2,000 farms in it.
Most of them are small family farms. And a lot of what I heard
here today seems to reflect kind of the desires of bigger
farmers, more kind of corporate-oriented farms than the ones I
represent. I mean, from the testimony that I have heard here
and what I have read, I mean, there is calls to kind of weaken
the Endangered Species Act to kind of go after some of the
Administration's proposed climate actions, weakening of
pesticide regulations by using industry science, and we heard
about the need to increase truck size and truck weights. And by
the way, with all due respect, I think it is a bad idea. We
live in the country right now with the highest road fatalities
of any developed nation in the world. And the Department of
Transportation has studied this and found that even a ten
percent increase in truck size and truck weights leads to less
control and potentially more crashes. And by the way, the
drivers of trucks don't want to see that. So I get it.
But a lot of what I hear from my farmers is related to
concerns about corporate consolidation, climate risk, climate
crisis. I do farm tours every year in my district, and farmers,
small- and medium-sized farmers, talk a lot about the impact
that the climate crisis has had on their ability to grow and
produce things. I hear a lot about food security. These are all
serious topics. And I hope that this Committee will focus on
them, similar to the way we did under Chairman Scott's
leadership.
But this hearing is about uncertainty, inflation,
regulations, challenges for American agriculture. And as we
meet some of the pandemic-related assistance in terms of food
for struggling families is about to expire. And it is going to
be more and more difficult for families to be able to get food
to put on the table. I guess, they tell me that SNAP is not
only for the neighbors in need, but it is also good for these
farmers and for their businesses. And so they get it. Farmers
grow food that people eat.
So, Mr. Larew, can you please discuss the importance of
SNAP to farming communities?
Mr. Larew. Yes, thanks for the question. And first of all,
I would just say, Farmers Union develops its grassroots policy
positions directly from our farmer members. And they renew that
each year and consistently have very strong support for making
sure that even as we are producing food, that we are doing
everything we can to fight food insecurity. And part of the
reason for that is because we know that the nutrition programs,
SNAP being the largest, have a huge impact not only on making
sure that we are fighting food insecurity, but also driving
support and market opportunities for farmers, whether it is
through fresh fruits and vegetables at farmers' markets. It is
also an economic driver in some of these rural communities. In
rural America, there is a food insecurity issue as well, and so
I believe the statistic is that for every dollar spent on SNAP,
you get $1.75 in economic return and activity. That goes into
those local grocers, and ultimately, throughout the community.
Mr. McGovern. And, I have heard criticism from some of my
colleagues about nutrition programs taking up too large a
portion of the farm bill, so given your expertise on these
programs, can you explain how production agriculture titles
work together with the nutrition title to help those in need
and support a robust farm economy?
Mr. Larew. Well, certainly the farm bill, of course, is a
food security bill, first of all, and so part of that bill is
designed to provide a safety net for those of us that are
working the land and producing food, whether it is through
helping support conservation practices and sustainability or
making sure that we have a safety net on the market itself.
On the food side, making sure that there is availability
and access for those who, through economic conditions or
whatever, are in need of additional assistance. Too often, I
sometimes hear the farm bill described as a pie chart that
somehow doesn't move and that as a percentage of one program
increases, that it might impact or decrease others. And that
relative comparison just isn't the way our kind of cyclical
programs work, right? One can increase or decrease without a
direct impact on any of the budget.
Mr. McGovern. Well, thank you. Mr. Duvall, thank you for
mentioning the need for a strong nutrition title in the farm
bill. I appreciate it. I think I am out of time.
Mr. Austin Scott of Georgia. Thank you. I now recognize
myself for 5 minutes.
And, Mr. Duvall, we are both from Georgia, and if you are
from Georgia, you not only hear about diesel prices and fuel
prices, but you hear about H-2A a lot, especially with our
specialty crop growers. And I have heard consistently from
farmers in my district as they are trying to navigate all of
the changes and the uncertainty about the 14 percent wage rate
increase that has occurred with regard to H-2A. Can you speak
to Farm Bureau's position on all of the changes to H-2A,
including the wage rate and additional transparency and how
that rate is actually calculated?
Mr. Duvall. Sure, Congressman. The AEWR, the wage rate that
is handed down to farmers that have to pay migrant workers that
are coming to you through the H-2A program is done by a survey,
and we think that that wage rate formula is flawed. And we
think we need to go back to the drawing board, look at how that
wage rate is set. I mean, if you ask any farmer, how did they
set that wage? They say you do it off some kind of survey.
Well, did you get that survey? No, I didn't. So we don't know
what the survey is, who gets and who fills it out, but we think
that it is very flawed. And if you look at a wage rate that
climbs faster than the inflation rate does, there is something
wrong with that. And if you go to most of these places, most of
these farms, especially small-, medium-sized farms, those
people that work there, whether they are migrant workers or
whether they are other workers, they are part of the family,
and they are taking care of those people, and they are paying a
very, very fair wage and expecting work out of them like we do
our own families.
So it is important that we find a way that we have a stable
workforce, that we can bring people from other countries here,
not be feared, not fear the Federal Government, and be able to
contribute to our society and work and have regulations that
farmers and ranchers can actually abide by. The regulation
piece of that is so burdensome that a small-, medium-sized
farmer has a very difficult time being part of that where a
large farm, which is very small percentage, might have an H.R.
department to deal with all that. But my farm with two
employees, I couldn't do that. So we need to find that way to
do that. And we need year-round workers, and we don't need to
cap it because we don't know how big the problem is.
Mr. Austin Scott of Georgia. Most of the farmers that I
know is, as you said, unless they are extremely large farmers,
use a third party, which is an additional expense, and it is
very complex. But the wage rate, it moved from $11.99 to $13.67
if I am not mistaken. But housing, food, there are a lot of
other things that are paid for on top of that $13.67 an hour,
is that correct?
Mr. Duvall. That is correct. You got to give them a place
to live. That place to live is inspected, all kinds of
regulations that goes around that. You got to give them
transportation, everything almost that you would do for a child
you have to do for H-2A worker.
Mr. Austin Scott of Georgia. One other thing I want to ask
you about, the current reference prices with regard to the
commodities, it seems to me that they weren't set when diesel
prices were as high as they are and fertilizer as high as it
is. Could you speak to the need to increase the reference
prices to reduce the risk to those that are actually out there
planting crops?
Mr. Duvall. I will. Actually, if you look at our
organization, we are looked at as a very conservative
organization. Our voting delegates in Puerto Rico at our annual
convention this year debated heavily whether or not to ask you
all to broaden the baseline. And of course they came down to
say, yes, it is time to broaden baseline because those targets
that we use in the commodity programs and the cost that we have
to go to of growing a crop is nowhere near what it was when
those targets were set, Mr. Congressman, and it needs to be
modernized, and it needs to be a true safety net based on the
cost of production today.
Mr. Austin Scott of Georgia. Thank you. I am extremely
concerned about the increased risk with commodity prices where
they are and having the potential to fall. Once you have paid
for those inputs, they are not going down.
And so I do want to mention since this was brought up
earlier, with regard to the ratios on the farm bill, my
understanding with the CBO numbers is approximately 82 percent
is now scheduled to go to nutrition, according to CBO. And that
leaves 18 percent, which gets split between conservation, crop
insurance, commodities, and a couple of other things. So those
ratios have changed, and they have changed significantly over
the course of time.
My time has expired. And with that, I now recognize Ms.
Adams.
Ms. Adams. Thank you. Thank you very much. And thank you to
our witnesses today for being here. Thank you for your service.
Mr. Larew, in your testimony, you address the trend of
market consolidation in farm and food systems as harming both
farmers and consumers. And you share that grocery store numbers
in the U.S. have dropped from 30 percent and large mergers like
the proposed merger between Kroger and Albertson's contribute
to higher consumer prices and fewer market options for farmers
and ranchers. So can you elaborate on the impact of grocery
retail consolidation on the farmers and ranchers that you
represent?
Mr. Larew. Yes, I appreciate the question. It really comes
down to market choice and options, and the fewer there are and
the more pressure there is further down the stream, that puts
even greater pressure on farmers and ranchers out there. So as
we watch the consolidation going on right now in the retail
grocery space, it is not just fewer choices and options within
the grocers, but then those few who have so much share then put
pressure down on processors and suppliers, and that then goes
further down to farmers and ranchers out there. This has an
ongoing impact also on the availability of grocery stores and
independent grocers out there. And certainly from the rural
Americans' perspective, it makes it even more increasingly
difficult to have independent grocers in our communities.
Ms. Adams. Thank you. The consolidation of meatpacking
plants has resulted in price fixing, poor returns for farmers
and ranchers, and dangerous working conditions for facility
employees. So can you share some of the factors that have led
to this problem, as well as what legislation you would like to
see us address issues in terms of competition and fairness?
Mr. Larew. Yes, well, I just say certainly Farmers Union
was founded in 1902 at a time when we had outrageous
consolidation and monopolies in banking and in the meat
industry and everywhere. And really, the impetus for creating
the original antitrust laws, which still remain on the books,
was to tackle that problem. And it worked for a number of
years. Then, changes in the 1980s led to an ever-increasing,
rapid consolidation and mergers throughout agriculture and food
into the situation that we have today where we have even less
competition than we did that led to the creation of the
antitrust laws. And so, right now, we don't see anything
stopping that. We need greater enforcement for antitrust,
greater oversight of the marketplace right now, and so we look
forward to working with you.
Ms. Adams. Thank you.
Mr. Brown, one of my top priorities is ensuring that Black
farmers, ranchers, and producers are treated equitably. So how
do you respond to allegations of racial discrimination against
minority poultry growers? And is the NCC doing anything to
support Black farmers and to ensure that they are treated
equitably?
Mr. Brown. I would say a couple of things on that front.
First, I am not aware of any discrimination against Black
farmers or any other farmers. I know in the State of Georgia
where Mr. Scott is we have a very diverse, very diverse growing
population that involves Black growers, Hispanic growers, Asian
growers. I know where I live in Delaware I have three plants
around me. I can't throw a baseball without hitting one of
them, and I have seen the diversity of the growers where I am.
Ms. Adams. Well, thank you, sir.
Mr. Brown. With respect to concentration if I could just
add to your question of Mr. Larew, I hear this concentration
discussion all the time. I can't speak for the other meat
industries, but for chicken, we have a vested interest in our
growers succeeding. We hatch the eggs, we take the birds to the
farms. In many instances, it keeps farmers, particularly
diversified farmers, on the farm by having additional----
Ms. Adams. Thank you, sir. I just want to get one more
point in here as I follow up in terms of Black farmers. So the
USDA investigators determined that Koch Foods, a poultry
company in Mississippi, violated USDA rules and actively
discriminated against Black farmers. And so the original
complaints were filed between 2010 and 2015, but we still have
not seen justice for the affected farmers. I just wanted to put
that out there. And if anybody has any suggestions about how we
can support a fair system that works for all growers, we would
like to hear. But I am going to share some information from my
office that I have about this discrimination as it relates to
Black farmers.
Thank you, Mr. Chairman. I yield back.
The Chairman [presiding.] I thank the gentlelady. I now
recognize Mr. Kelly for 5 minutes.
Mr. Kelly. Thank you, Mr. Chairman.
The current Administration continues to tout the importance
of increasing meat and poultry processing capacity across the
nation. However, their policies online tell another story. Mr.
Brown, if all of the poultry processing plants currently
operating at higher speeds under waivers were suddenly forced
to slow down their operations, what effect would it have on
slaughter capacity, the supply chain, and food security? And,
Mr. Duvall, after he answers, I would like for you to answer
also.
Mr. Brown. Thank you, Congressman, it would have an
extraordinary impact on our industry, take out over 30 percent
of production. Today, when you visit the meat case, the lowest-
cost protein and the most purchased protein is chicken. Take 30
percent out of production--when you come up with government
regulations like this, some people pay twice. The taxpayer is
going to pay for expanding government, and the same taxpayer in
the grocery store is going to pay more for groceries.
The other group of people that hurt if we cut back down on
production are the people that I know we are all concerned with
in this room, and I am too, growers, fewer chickens, fewer
birds placed, and the growers are put in a difficult position.
So I hope we can work together. I think we all have our heart
in the same spot.
Mr. Kelly. Mr. Duvall?
Mr. Duvall. I would agree with Mr. Brown. I just recently
went and toured a facility where they were harvesting poultry.
And everyone ought to go. It was mind-boggling how clean and
how fast and how safe it was. I was blown away by the quality
of work and the quality of the birds and how they did it and
how safe it was and how clean it was. I come away with a whole
different feeling about the processing end. But he is exactly
right. You slow that down, it slows down on my farm and it
costs me money. They are not going to pay me because it is late
leaving. They are not going to pay me if it sets on before it
gets to scales and loses weight before--they are not going to
pay me. It is going to cost farmers themselves money. And if we
have the data and they say they do--I don't have the data--the
safety and the speeds and how it works together, I think we all
go by that data and sound science.
Mr. Kelly. Thank you, Mr. Duvall. And, Mr. Chairman, I will
yield the balance of my time to Mr. Bacon.
Mr. Bacon. Thank you, Mr. Kelly.
My first question is Mr. Duvall if I may. I hear a lot of
feedback from our farmers and ranchers in Nebraska on the
Waters of the U.S. Can you give your position and the negative
impacts of Waters of the U.S. through the farmers and our
ranchers?
Mr. Duvall. Yes, sir. The Waters of the U.S. rule is the
largest land grab of the Federal Government in history. And if
you look at how that rule has moved from Administration to
Administration, our farmers feel like a ping pong ball going
back and forth from one side of the table to the other, not
being able to make long-term decisions based on what evidence
we have. This new rule that came out in December, it took it
from a rule that was clear, that we can understand, to make it
just muddy as muddy water. Right now, we don't know what an
ephemeral stream is, whether or not it is a navigable water or
whether it is a significant nexus. So we are waiting on the
Supreme Court rule on the Sackett case, hoping it gives us
clarity so that we can get a rule that is clear, so that we can
provide clean water like we always do because water is a
resource that goes on farms and some have been there for
generations. And the last thing we want to do is hurt the
natural resources on our farm because our families live on it
and drink the water and we want to have a clear rule to make
sure we know how to abide by it.
Mr. Bacon. Thank you for your perspective. A follow-up
question on trade with you, Mr. Duvall. Is China meeting its
trade requirements or agreements that were stated under the
previous Administration? Are we holding their feet to the fire?
Mr. Duvall. Could you repeat that again?
Mr. Bacon. Is China meeting its trade agreements that they
made with the previous Administration? Do we need to be doing
more to hold their feet to the fire?
Mr. Duvall. Phase one trade agreement was huge for
agriculture. And did they meet it totally? No, and they didn't
meet it in the second year of it. But that trade agreement was
really helpful to our farmers and ranchers and put us in that
market to be able to sell to them. And we need more trade
agreements like that, but we need to hold their feet to the
fire just like we need to hold Mexico's feet to the fire when
it comes to biotech and their discussion around not taking our
corn.
Mr. Bacon. Mr. Rosenbusch, the herbicides, pesticides, or
fertilizers that have tripled or quadrupled in cost, has it
become better for our farmers right now in this area, and what
can we do to do better?
Mr. Rosenbusch. Yes, so thank you for that Congressman
Bacon. And, as I mentioned in the testimony, we have seen a
softening in the market recently, so prices have come down, in
some cases, half the cost of what they were last year. Several
reasons for that: One, I think farmers are waiting, a wait-and-
see approach, and so that softened the market a little. But
some of the global markets, as I referenced, have also opened
back up, so you see a lot more product moving that impacts that
supply and demand all over the world, whether it is India or
Brazil.
So I think, going into the spring, that wait-and-see
approach has impacted where we are today. But I think long-term
we also have to just look at what that global stock-to-use
ratio is and the fact that we still need to be planting acres
and crop prices are still going to be high, and so that is
going to lead to more demand. So that volatility has been what
has been most impactful.
Mr. Bacon. Thank you. And, Mr. Chairman, I yield back.
Thanks.
Mr. Duvall. Can I make a quick statement to that? We may
wait around, but when it comes time, you got to put that
fertilizer out? If you don't, you miss the window and you are
less productive.
The Chairman. Good point. The time has expired.
Now, I am pleased to recognize the gentleman who really
helped us host a great listening session in the Central Valley
in California.
Mr. Costa. California.
The Chairman. Mr. Costa, for 5 minutes.
Mr. Costa. Well, thank you very much, Mr. Chairman and
Ranking Member. And it was a good listening session that we had
with the Committee. And those Members that were able to attend,
I think we were able to pick up a great deal of information.
I think when we look at today's topic on uncertainty,
regulations, and inflation impacting the farm country, I am
reminded of the fact of a third-generation farmer that, they
ebb and flow over decades. Certainly, uncertainty is always a
question and change is constant in farming for sure. The
regulatory structure continues to be challenging, and it varies
from region to region, state to state, as well as on the
Federal level. But it is important that we raise these issues
and we hear from leading agricultural organizations about the
impacts on farm country because representing a very significant
farm area in California and a third-generation farmer, I
understand and hear these every day.
And I remind people two things: One, food is a national
security issue. It is a national security issue. And I think
maybe with the impact, sadly, of the pandemic, people, when
they saw shortages on shelves, maybe began to understand that
the food that they enjoy every night may come from a grocery
store or from their favorite restaurant, but that is where they
get it. That is not where it comes from. It is hardworking
farmers, ranchers, dairymen and -women, and farmworkers that
frankly put that food on America's dinner table every night.
The second thing I think is important for the purpose of
this hearing is--and I say this all the time going back to my
years in Sacramento--farmers are price-takers, not price-
makers. And people think, well, what do you mean by that? Well,
I mean, you put all those input costs throughout a year into
your crop, and so at the end of the year, you may have X
invested in that crop but the price that you are getting is Y.
And you can say, well, I can't make it with Y because I lose
money. I need something else. Well, the fact of the matter is
you are a price-taker. You don't have the ability to set the
price for your inputs. And that is important to note when we
think about the farm bill this year and the safety net that it
provides for American farmers and ranchers and also for the
nutrition programs as well. And I am thankful that many of you
have mentioned the importance of the nutrition programs.
One of the things we haven't talked about in terms of the
security and the impacts we have seen under the regulatory and
supply chain effort is the impacts that we have seen when our
food supply chain was turned upside down. It resulted in a
bipartisan effort on the Ocean Shipping and Reform Act, which
Congressman Johnson, Garamendi, and I moved forward. It was
signed into law and implemented now, and we are looking at this
critical piece of legislation.
Mr. Friedmann, I would like to thank you for your
participation in this. Can you explain the impacts of holding
global shippers accountable so that we can stabilize the input
for prices, getting back to price-takers and price-makers? One
of the key things is in California, 44 percent of our
agriculture is exported, and so this had a real havoc in terms
of our ability to export and our prices. Could you please
comment?
Mr. Friedmann. Thank you, Congressman Costa. I began my
testimony by thanking our heroes here, Congressman Johnson and
yourself----
Mr. Costa. God bless you.
Mr. Friedmann.--on this Committee for accomplishing
probably the greatest benefit for U.S. agriculture in foreign
markets that has been accomplished in at least 2\1/2\ decades
here with the Ocean Shipping Reform Act last year. It kept the
U.S. and it will keep the U.S. exporters in the foreign
markets.
And if I could say this, I have heard from many members
that, well, I represent small farmers and they don't export or
they sell to producers or brokers. How does this impact them?
Guess what? During the pandemic, as you know, because some of
your constituents were unable to get the products exported to
the foreign market, they couldn't get it on the ships. What
happens to that product? It just gets dumped onto the U.S.
market, and that is the market that the smaller companies that
don't export----
Mr. Costa. Right. And we had markets, but we couldn't get a
consignment to put the product on the ship to get it to market.
Quickly, we are looking at reintroducing the Ocean Shipping
Antitrust Enforcement Act (H.R. 6864, 117th Congress). How do
you think that could help out?
Mr. Friedmann. I think it can help out by recognizing the
consolidation that has been spoken about today in ocean
shipping. There are now ten ocean carriers left in the world,
and they are consolidating further into those three alliances.
And, if we don't have an ability in the U.S. Government, which
we do not now under current law have the ability to review
those proposed consolidations before they happen, they are
going to just continue, and pretty soon, we are going to be
down to no competition for the U.S. export commerce.
Mr. Costa. Yes. Well, thank you. My time has expired. Mr.
Chairman, this is something that I think we need to work on, in
addition to the farm bill this year, and I look forward to our
continued effort.
The Chairman. Well, I thank the gentleman, it is all part
of the agriculture supply chain.
I am pleased to recognize the gentleman from Kansas, Mr.
Mann, for 5 minutes.
Mr. Mann. Great. Thank you, Chairman Thompson, for having
this important hearing and to all of our witnesses that are
here today.
I represent the big First District of Kansas. Last week, I
had 15 town halls all over western Kansas where farmers,
ranchers, and ag producers told me, like they have been saying
for the last 2 years, that their businesses and livelihoods had
been very impacted by increased input cost and overburdensome
regulations. On top of all this, we are in a major drought
throughout western Kansas and really throughout the Great
Plains in this country.
From 2000 to 2020, the average annual rate of inflation was
2.1 percent, which economists consider a normal rate of
inflation that helps drive overall economic growth. In 2022,
input prices skyrocketed, and we saw the largest December-to-
December percentage change since 1981 when everyone in this
room knows full well the farm economy then crashed due in part
to surging inflation. Unfortunately, 2023 does not look much
more promising on the input side of the equation. USDA
anticipates that production costs will increase this year to a
record $500 billion.
My question is for you, President Duvall. Does the current
farm safety net provide adequate risk management to cover these
expenses and reflect the risks that our ag producers truly have
in modern-day production agriculture?
Mr. Duvall. No, it doesn't. It needs to be modernized. It
needs to be studied and reflect the true cost of production as
of today.
Mr. Mann. I wholeheartedly agree, which is why farm bills
are 5 year bills to be updated with the times, incredibly
important.
Mr. Duvall. And that is why, painfully, our members asked
for the baseline to be broadened.
Mr. Mann. Yes. Yes. At a time when inflation is at a 40
year high, Congress should be working to eliminate barriers for
the ag sector, not hamstringing our hardworking Americans with
government overreach. Given all of this, I am concerned
especially with the Biden Administration's rulemaking under the
Packers and Stockyards Act, including their proposed rules on
transparency, inclusive competition, and market integrity. USDA
has stated that it is its intent to clarify that parties do not
need to demonstrate harm to competition in order to bring an
action under Section 202(a) and 202(b) of the Packers and
Stockyards Act.
These rules, if finalized, would profoundly alter the
operation of American protein markets and have devastating
impacts on the quality, efficiency, and innovation of American
animal agriculture. Producers would lose the ability to reap
the financial rewards of their superior performance and
product, and consumers will be saddled with higher costs for
lower-quality products. These rules, in my view, are an
egregious example of regulatory overreach, which will harm
producers and consumers.
Mr. Brown, if finalized, what effect do you see that these
rules will have on the quality of animal protein available to
consumers at restaurants and grocery stores across the country?
Mr. Brown. Thank you for your question. I think I could sum
it up in one sentence. Basically, what these rules would do is
turn any interaction between a processor and a grower into a
litigation flashpoint. It is going to add cost, and, at the end
of the day, it is not going to help our growers.
Mr. Mann. Yes, I agree. And at the end of the day, the
consumer is going to lose as well because they are going to be
paying more for a lower-quality product.
Mr. Brown. And back to a point I made earlier, you expand
the government, taxpayer has got to pay for it, and then they
get to pay for it again when they go down to the grocery store.
Mr. Mann. Yes. Yes. I am also concerned with the EPA's
recent proposed revisions to the interim decisions for
Atrazine, an important herbicide that corn and sorghum growers
in my district and across America rely on to increase yields
and implement conservation practices. The decision included a
picklist of mitigation measures that EPA developed without
feedback from USDA that producers would be required to
implement when using Atrazine. While I understand that the USDA
does not have final say in the regulation of crop protection
tools, I believe that EPA can benefit from the ag expertise of
scientists and staff at the USDA.
Question for Mr. Twining. How can the EPA and USDA work
together to ensure producers continue to have access to the
tools that they rely on in modern-day production agriculture?
Mr. Twining. Thank you, Congressman Mann. I would say just
in general everybody has opinions. I like to live in a world of
facts. And the USDA has several subject matter experts that
understand the practical implications of regulation and
pesticide management. Currently, my understanding is there is
no direct requirement for EPA to coordinate with USDA when it
comes to developing things like mitigation matters. So we would
support that requirement and a formal connection between the
USDA Office of Pest Management and EPA to make better logical
rules.
Mr. Mann. I see my time has expired. Thank you, Mr.
Chairman. With that, I yield back.
The Chairman. Well, I thank the gentleman.
I am now pleased to recognize the gentlewoman from
Virginia, Ms. Spanberger, for 5 minutes.
Ms. Spanberger. Thank you very much, Mr. Chairman.
I was just with the Farm Bureau in Virginia in Madison
County, where I held a roundtable with many of the producers
from our district. And so I just want to thank all of the
organizations here present for the work that they do in
advocating. I also want to thank Mr. Brown because among the
things that we talked about was the Highly Pathogenic Avian
Influenza, the impact that that has had on the poultry
producers in my district, certainly, we know in the grocery
store on the cost of eggs, the death of birds, and frankly, the
dire issue it creates for producers and families, and
importantly, for the veterinarians who are trying to deal with
this outbreak. There were discussions related to the shortage
of penicillin, and I would love to follow up on that topic in
the future so that we can make sure that we are strengthening
our ability to fight back against any type of illness that
might be impacting our animals in the future.
Mr. Duvall, I really want to thank you for your discussion
and in your opening remarks talking about the national security
implications of a country that can't feed itself. As a former
intelligence officer, certainly, that is central to my view of
our work in supporting Virginia's agriculture but certainly
agriculture across the country.
And, Mr. Friedmann, your discussion about the
transportation impacts of the Ocean Shipping Reform Act, which
I was proud to support, and also the challenges that we are
facing because of changes in the trucking industry and aging
workforce. These are all issues that I continue to focus on
because the producers in my district say that it matters to
them. And certainly, we see that trend nationwide.
I am grateful to my colleague Ms. Adams and Mr. Larew for
talking about consolidation within the meatpacking industry and
the enforcement of antitrust laws that exist on the books. And
I am also really proud that we have seen localized processors--
and Mr. Johnson has been a partner with me working to make sure
that we can have local processing facilities. Certainly, we
have one getting built out in my district that is really going
to matter to our growers.
But my next question, well, my first question, actually, is
aimed at Mr. Larew. So I really want to thank you for
highlighting an issue that I know impacts many of the producers
I represent, and that is senseless restrictions and barriers
that prevent them from repairing their own equipment. I have
been working closely with Senator Tester on this issue and hope
to be introducing legislation in the House that would ensure
that farmers have the tools necessary to repair their own
equipment. Farmers should not be held ransom by big
corporations when it comes to the literal tools of their trade.
So could you just talk about some of the current legal barriers
and liabilities that face farmers who try to fix their own
equipment that they own or that have to rely on a third party
to do so?
Mr. Larew. Yes, I think it is a pretty shocking issue for a
lot of folks who aren't familiar with it that, if for some
reason you went to take your car, your pickup, and you weren't
allowed to take it to the shop there in town but you had to
take it to the dealer if you weren't allowed to work on it
yourself. And so the auto industry actually took care of this a
number of years ago, but in farm equipment, certainly, with the
adoption of additional technology, farmers are currently--or
any producers are not allowed to touch--to access the codes to
fix their own equipment or to get any independent. This drives
up cost of that. It impacts harvest, for example, if you have
harvesters broken down and you can't get your miles from
anybody to get that repair, so----
Ms. Spanberger. Because you have to wait for somebody to
come who is allowed to come and fix it. You have to wait for
that----
Mr. Larew. Absolutely. For somebody to actually have the
sensor to be able to show what is actually wrong with this.
This barrier, we have had promises in the past from the
equipment manufacturers that they will allow access to this
information and allow some independent repair. That, however,
did not come through, so we need to see laws on the books to
enforce that right to repair.
Ms. Spanberger. Thank you very much.
And, Mr. Duvall, in the limited time I have left can you
just speak to the importance of maintaining the high funding
levels for the conservation title in the farm bill? How do you
see continued access from year to year to voluntary--and I
stress that point, voluntary--conservation programs that help
farmers and producers certainly like they do in my district?
How does that provide them with certainty for their bottom
line?
Mr. Duvall. Sure. As our society moves more and more toward
discussion around climate, there is going to be more asked of
farmers and ranchers, and to do that, we have to have voluntary
programs that we can volunteer for and have participation from
everyone to help us put that on the ground, so it is important.
And if you look at the history of the programs that are there
in conservation, they have been sorely under-funded and
highly--the applications for are out the ceiling. And
hopefully, we will have the funding to be able to put those
practices on the ground. And then the next problem is the
technical support in USDA to help our farmers put it on the
ground. That is a very interesting thing that everybody needs
to be aware of.
Ms. Spanberger. A huge issue. And with that, Mr. Chairman,
thank you for your indulgence, and I yield back.
The Chairman. I thank the gentlelady.
And now I am pleased to recognize the gentleman from the
rice and duck capital of the world, Mr. Crawford, for 5
minutes.
Mr. Crawford. Thank you. I wish you had had better luck
when you were there.
The Chairman. Me, too.
Mr. Crawford. First and foremost, I am concerned about the
Administration's rulemakings under the Packers and Stockyards
Act, and I think it would have negative effects on the cost and
quality of protein products for U.S. consumers and that USDA is
in fact overstepping their authority in making these rules.
Congress last spoke to this issue in the 2008 Farm Bill and
again blocked USDA from making similar rules from 2012 to 2015.
In its latest attempt to circumvent the will of Congress, USDA
has taken the unusual step of breaking their proposals up into
four distinct parts, which will obscure the true economic
impact of their proposal and make it difficult for affected
stakeholders to accurately assess the full implications of
their proposed changes.
Last September, my Republican colleagues and I on this
Committee sent a letter to Secretary Vilsack warning him that
these rulemakings likely violate the major questions doctrine.
And despite the Secretary's outlined response, my concerns
remain today and will going forward.
Switching gears a little bit, Mr. Twining, in your
testimony, you mentioned free and fair trade among ag producers
and customers, and I would argue that free and fair trade are
not necessarily the same thing. But for the purposes of our
conversation, can you help us identify any duties and tariffs
that have impacted the price of fertilizer?
Mr. Twining. Well, yes, Congressman. Most recently--and it
is important to understand our particular business operates on
the coast. The supply chains for the coastal regions of the
U.S. are very different than for the central parts of the
country. We are much more dependent upon ocean trade and
imported products to support our farmers, and a lot of the
domestic production cannot reach us. And most recently, there
was a proposed tariff on UAN solution, which is the nitrogen
source our growers use. Fortunately, it was not approved. But
that type of tariff would have been very detrimental to the
competitiveness both of American agriculture in general, as
well as the viability of producers on both coasts of the
country.
Mr. Crawford. So there was a tariff proposed, and who
proposed that tariff?
Mr. Twining. CF Industries, I believe, proposed that
tariff.
Mr. Crawford. Okay. We have seen this Administration impose
and release tariffs on fertilizer from both Morocco and
Trinidad and Tobago. I think we need to look at farmers' input
costs from the fair trade perspective to give producers the
lowest possible input costs available.
Mr. Rosenbusch, in light of your industry's record profits,
what are the intentions of the industry to address the critical
needs that the U.S. producers have dealing with record-high
input costs for domestic producers?
Mr. Rosenbusch. Yes, thank you, Congressman Crawford, and
your expertise on fertilizer is always appreciated. I would say
that we live in a globally traded commodity--we are a globally
traded commodity that relies a lot on supply and demand. And so
as we think about what is going on geopolitically with Russia,
with Belarus, with China, all of those, as you mentioned, and
trade restrictions that China has put on some of their exports
have an impact on the farmer right here in the United States.
So, from a free markets perspective, you are going to see price
setters such as Europe, which is the marginal producer right
now with high natural gas costs that is going to drive up that
cost of fertilizer right here for United States farmers.
And furthermore, I would say that, if you think about it,
it is hard to put fertilizer all in one category, but,
generally speaking, the American farmer actually has fertilizer
available at a discount compared to a lot of the competitive
farmers in Brazil or Africa or other places. So, I think
ultimately looking at opportunities to expand production and
capacity is definitely on the agenda. I think that some of the
regulations and the permitting challenges that we face,
restrict some of that. And so whatever this Administration and
Congress can do to help bolster that supply would be terrific.
We had one member that runs a phosphate mine spent 10 years
already and $32 million to expand phosphate production. So that
kinds of assistance would help ensure we have more nutrients
available.
Mr. Crawford. Thank you. And real quick, switching gears,
this farm bill, Mr. Duvall, it is becoming abundantly clear
that we will need to make a push to increase PLC reference
prices. Give me a good reason why it is food security, it is
national security, why do you believe it is so important that
we address that PLC reference price?
Mr. Duvall. Well, just like a nutrition project program is
a safety net for people in this country that need help at that
point in time, when farmers go through a disaster of some kind,
whether it be weather, whether it be prices, or whatever it
might be, that safety net needs to be strong, and it does not
reflect today's cost of production.
Mr. Crawford. I appreciate that.
Mr. Chairman, I yield back.
The Chairman. Well, I thank the gentleman. Now I am pleased
to recognize the gentleman from Iowa, Mr. Feenstra, for 5
minutes.
Mr. Feenstra. Thank you, Mr. Chairman. This is a really
important----
The Chairman. Oh, I am sorry, I messed up my order, My
apologies. I am now pleased to recognize--we will get back to
you, Randy, I promise you, and we will let you start from the
very beginning, too. You will get the full 5 minutes.
I am pleased to recognize the gentlelady from Ohio, Ms.
Brown, for 5 minutes.
Ms. Brown of Ohio. Thank you, Chairman Thompson and Ranking
Member Scott, for holding this hearing today. And thank you to
our expert panel for being here. Your perspectives are helpful
as we look ahead to the next farm bill.
Over the past few years, our nation has faced a once-in-a-
lifetime pandemic, historic weather disasters, exasperated by
the climate crisis and challenging trade wars, all of which
have contributed to rising costs throughout our food chain
supply. On the front end of the supply chain, farmers are
facing record-high input costs and production expenses only to
face a market that is increasingly volatile and uncertain.
So this question, gentlemen, is for Mr. Larew. In your
opinion, what are the biggest contributing factors to the
instability farmers are facing in the market today?
Mr. Larew. Well, that is a great question. And I am trying
to quickly think about how to sum it up because there are
enormous challenges that face farmers. And, as farmers, we are
used to volatility. We are used to uncertainty in a lot of
ways. But as you well point out, right now, that is being
exasperated by climate change. It is being exasperated by
pandemic and supply chain disruptions.
I might just say that one of the biggest challenges that we
are facing that we are having to come to bear with right now is
that the pandemic in particular showed that while we have a
very efficient food system, the envy of the world in many ways,
and certainly the safest, what we don't have is a resilient
food system, and that ultimately impacts farmers very directly
and consumers because the more that we can spread out, process,
and create market opportunities, that is much better for
farmers, it is better for those rural communities, and then
that ultimately feeds all the way back up to better
opportunities for consumers on the other end.
Ms. Brown of Ohio. Thank you for that. And furthermore,
underserved producers, including Black farmers and other
producers of color, have been particularly hard hit by the
impacts of inflation on input and other costs. So to Mr. Larew
and any other witness who would like to jump in, can you
describe actions taken by this Administration to aid
underserved producers and whether you have any suggestions of
things we should explore in terms of risk management to enhance
the availability and accessibility of programs for underserved
producers?
Mr. Larew. Yes, it is important, and certainly this
Administration has taken a hard look at it. I think time will
tell what the impacts of that are. But they certainly have
tried to, through some of the programs and funding that they
have issued, really taken a focus on making sure that those who
are underserved, those who have had historically lack of
access, whether it is capital or any access to any of the
programs. So I think that this ongoing focus, whether it is as
we look ahead to the next farm bill or any proposals that we
are looking to add, this question of equity and inclusion is
going to be an important one. It is one that we made reference
earlier. Mr. Duvall down there at the Farm Bureau, along with
many other organizations through the Food and Agriculture
Climate Alliance, those recommendations had the very important
input of the Federation of Southern Co-ops, making sure that
equity and access to capital and access to these climate-smart
programs are available to everyone.
Ms. Brown of Ohio. Thank you. Anyone else?
Mr. Duvall?
Mr. Duvall. Yes, ma'am. The things of the past, they should
not ever happen again. And we need to make sure that USDA, our
organizations, and everyone, our outreach needs to be better.
We have recently in last 3 or 4 years, reached out to MANRRS
(Minorities in Agriculture, Natural Resources, and Related
Sciences), AFA, and other youth organizations to make all youth
from all parts of life to be aware of what they can participate
in our organization, give them information as to what
agriculture holds for them, where their place could be, and
give them an opportunity to know what the programs are out
there, whether it be through USDA or some other places that
they could take advantage of to be more involved in
agriculture. There are more jobs in agriculture than there are
graduates wanting them, and there is no reason for anybody to
be discriminated against because we need all those brilliant
minds, regardless of where they come from, and we need them now
because looking at the future of our food production and
talking about it being national security, it is at an emergency
level that we find out how we make agriculture attractive to
young, intelligent minds.
Ms. Brown of Ohio. Thank you so much.
Mr. Chairman, while we talk about inflation, uncertainty,
and the rising costs on the front end of the supply chain, I
would be remiss not to mention the same inflation and
uncertainty is hitting families on the opposite end of the food
supply chain in the form of high prices at the grocery store.
So while we are discussing mitigating ways to alleviate the
farmers' pain, we must also discuss how to assist families,
particularly those who have fallen on hard times in the form of
protecting and strengthening our SNAP program.
And with that, Mr. Chairman, I yield back.
The Chairman. I thank the gentlelady. And inflation
definitely doesn't discriminate. There is no doubt about it. It
is a heavy weight on everyone.
Now, I am pleased once again to recognize the gentleman
from Iowa, Mr. Feenstra, for 5 minutes.
Mr. Feenstra. Thank you, Chairman Thompson and Ranking
Member Scott. I want to thank our panel of witnesses. It was
impressive to not only hear your testimony, to read your
testimony. This is serious times, and I am excited to be on the
Agriculture Committee to work on the farm bill with the
Chairman and with the colleagues on this Committee. We have an
important task to do. But we also have other tasks related to
the topic of the day, of the situations of inflation and
regulations and uncertainty that is really affecting our
farmers, our producers, and our families and small businesses.
Because of inflation, because of the high costs of inputs, that
obviously is raising commodity costs, that obviously raises
food costs. It all goes together.
Traveling my 36 counties, I have the second-largest ag-
producing district in the country, and I have heard from my
farmers and local leaders about the hardships they are facing
when it comes to accessing capital and dealing with the
burdensome regulations.
So, Mr. Duvall, I want to talk to you about one of the
biggest challenges that I have heard is farmers facing
affordable access to capital, meaning that over the last year
and a half, we have seen interest rates dramatically climb,
doubled, more than doubled. And we see the Fed now saying,
``Hey, we are not tamping down inflation,'' that inflation is
still rising at an alarming rate, obviously highest in 4
decades. This really affects farmers because now they are
trying to get a credit line either to buy livestock or to put
in their crop this spring, and yet banks are going, wait a
minute, this is your interest rate. I mean, this is a real
problem. I was wondering if you could address that and how it
stifles production, and then also how it stifles new precision
ag technologies for getting on the market to create more
efficiency.
Mr. Duvall. Yes, of course, and thank you for the question.
Availability of credit is crucial to agriculture, not just when
you get into the business; but, we have a medium-sized farm
that might borrow $1 million to put a crop in the ground. Who
in the world does that knowing that we have to depend on rain
and all the elements and what might happen to do that. And of
course the banks are trying to be protective of the assets that
they--capital that they loan us, but that is why the programs
are so important. It gives a foundation and a safety net not
just for farmers, but for lending institutions, the people that
buy the food at the grocery store, and everyone. That is why it
is so important. It does stifle technology. And technology is
what keeps us efficient, sustainable, and on the cutting edge
and competitive to the world.
Mr. Feenstra. Well, thank you for those comments, and you
nailed it. And this is why when we have inflation and we have
interest rates growing at a fast rate, it is just crushing our
farming community. And how we want to create more efficiencies
and more effectiveness, we can't because of the cost of
interest.
Mr. Duvall. I farmed during the 1980s, and I remember going
in when we didn't have 24 hour news and there was some farmer
that was upside down on the news that had hurt himself or
someone because of the stress he was under.
Mr. Feenstra. Yes. That is right.
Mr. Duvall. Interest rates are crushing, and our young
farmers, whoever they might be, are going to feel the brunt of
that worse than they have ever seen before if it continues to
rise.
Mr. Feenstra. Yes. I agree 100 percent, and there is no end
in sight right now. And the Fed has said this, that they don't
know when these rate increases are going to end.
Mr. Twining, I got a quick question for you. The other
thing that I am hearing from my 36 counties and ag people is
obviously the Waters of the U.S. and the unprecedented ruling
that came down from the EPA where they doubled down on
expanding the significant nexus test on navigable waters. And
you think through what this actually does, I mean, I think
about being a farmer and all of a sudden you have water in your
creek or your pond or coming out of one of your tiles and now
all sudden is regulated by the EPA. I mean, frankly, whether it
be plowing, moving a fence, putting in a fence, it is all now
under the jurisdiction of the EPA, which in essence could fine
them if not done correctly or if they didn't get a permit.
Again, not even thinking about it, the farmers would have to
get a permit if this is actually the case. Can you explain
further to me how this is truly detrimental to our farming
community and how our farmers probably know best?
Mr. Twining. Yes, sir. We deal with growers from 20 acres
to 12,000 acres as an ag retailer, and we are on their
operations every day. And you did not have the certainty that
you can perform any type of operation, whether that is an
application of a pest control product or a plant nutrition
product or to do something as simple as plant or harvest a crop
based on whether or not we got a big rain the night before.
Mr. Feenstra. That is right.
Mr. Twining. And to not have that clear definition creates
tremendous uncertainty that really just paralyzes our ability
to do business and to produce food in an efficient manner.
Mr. Feenstra. Yes, I appreciate your comments, and thank
you. I am out of time. I yield back.
The Chairman. I thank the gentleman. And now I am pleased
recognize the gentlelady from Colorado, Congresswoman Caraveo.
Ms. Caraveo. Thank you, Mr. Chairman. And thank you to you
and to Ranking Member Scott for hosting this hearing today and
to the witnesses, thank you so much for being here. I am very
excited to be participating in my first Agriculture Committee
hearing, and I am glad that it is on this very important topic
on the challenges of our agriculture producers and what they
are facing.
I represent three of the largest ag-producing counties in
Colorado, including Weld County, which is actually the largest
ag-producing county outside of California. My ongoing
conversations with farmers and ranchers reflect the real
concern heard here today on high costs, weather, and climate
uncertainties. Colorado farmers actually recently saw the State
House approve a Consumer Right to Repair Equipment Act (HB23-
1011). So thank you to Mr. Larew for your comments earlier.
What the law there in Colorado would do is require
manufacturers to provide parts, software, and tools to
independent repair providers and equipment owners. And so I
think that this is also a very important topic that we need to
take on at the Federal level.
I know that in my family when we are talking about
repairing things, what my niece always tells my dad as he is
fixing his truck or something around the house is ``Abuelo,
just Google it.'' And that requires broadband access, something
that I know in parts of Colorado is very difficult, especially
for beginning and small family farmers and ranchers. They have
to take on the cost of broadband on top of inflation.
So, Mr. Larew and Mr. Duvall, I would love to hear you talk
about the importance of affordable broadband being available to
rural communities, especially for our farmers and ranchers.
Mr. Larew. It is critical. You have heard one of the themes
that has been mentioned several times here about farmers'
ability to innovate, right, and to get creative, whether it is
googling or a new repair or something. But that requires access
to that technology. It requires the ability to communicate. And
whether it is high-end equipment out there that is connected or
whether it is your family trying to make sure that you can have
an on-farm job if you will in order to cover health insurance.
We haven't even talked about this issue today, but so many farm
families have someone that works off the farm because of the
challenges that we are talking about, because of those thin
margins that are out there, and because of the lack of
affordable health insurance in some cases. So on-farm income or
kids coming back to the farm is made much more accessible when
there is high-speed internet.
Personally, when I am at the farm in very rural West
Virginia, just across the Allegheny Mountains and south of
here, if I want to be able to have a Zoom call, just a simple
Zoom call with somebody, I have to drive 25 minutes to the
truck stop, sit in the parking lot, and have that conversation,
and then get back to the farm. That is not efficient, and that
is not a way to move things forward.
Ms. Caraveo. Mr. Duvall?
Mr. Duvall. He is telling the truth. I have seen him
sitting in there because we have a lot of Zooms together. You
are exactly right. And as we talk about society thinking more
about climate, all that new technology is going to require us
to have broadband. And without that broadband, small-, medium-
sized, regardless what size you are, what is not going to be
available to you, you are not going to be able to use it.
Collecting data, data is--who knows what it is going to be
worth to the farmer because he owns all that data on his crops
and his tractors and everything that--and what that is going to
be worth to him someday, we don't have a clue what that is. But
without broadband, we can't collect all that and be able to
store it and do the right things. And just as important is cell
phone service. Farmers live a lonely life, a lot of times miles
and miles and miles from anyone. And just to have the security
of having something, you can contact somebody in case something
happens. And our business is only second to mining being the
most dangerous business in the country.
So there are a lot, a lot of reasons, but this is the one I
don't want everybody to forget. Our rural communities are
drying up and going away, and our young people go to college
where they have great internet and they learn all these
wonderful things. We are moving toward a society that more
people are working from home. We want those young people to go
home and work from home, but they are not going to be able to
do it without good broadband service.
Ms. Caraveo. Thank you, gentlemen. I yield back my time.
The Chairman. I thank the gentlelady. Now, I am pleased to
recognize the gentleman from Minnesota, Mr. Finstad for 5
minutes.
Mr. Finstad. Thank you, Mr. Chairman. And thank you for
having this important hearing today. And to each and every one
of you up there, thank you so much for being here and the work
that you do for the greatest population of folks in this
country, and that is our farmers.
I am a proud fourth-generation farmer myself. I like to
tell people I grow corn, soybeans, and kids. So I am raising
the fifth generation.
And, President Duvall, you hit the nail on the head in
regards to just engaging and bringing back youth to the farm.
And I joke quite often about technology and how we have to
embrace it. And in the conversation that we just had here in
regards to the broadband and connectivity in rural America, my
dad said he was going to retire from farming when the tractor
drove itself. We got auto steer. Sure enough, he retired. My
son plants corn with an iPad. So that technology and that
ability to connect is so important to strengthening rural
America. So thank you for your comments on that.
But make no mistake, farm country is facing several
challenges, including increased input costs, the supply chain
challenges, interest rates, and burdensome regulations passed
down by bureaucrats in D.C. And farm and food security is
national security. We have heard that said ten times here
already. And so we must do everything that we can to tackle
these challenges while supporting our farmers as we continue to
work to feed and fuel the world.
So with that being said, maybe digging in a little bit here
in regards to the regulations, and I have always said that we
need to make sure that regulations are based on science, not
political science. And so in regards to that, in August 2021,
the Biden Administration published a final rule that revoked
all tolerances for chlorpyrifos--in farm country, Lorsban--
effectively banning the use of this important crop protection
tool for growers, including those sugarbeet and soybean growers
in Minnesota.
Administrator Regan publicly claimed that the courts tied
their hands. However, the Ninth Circuit gave the EPA the option
to revoke or modify those tolerances. Instead of following the
science outlined by both EPA and USDA scientists that allowed
for 11 safe uses, the Biden Administration chose to ban this.
So, Mr. Twining, can you talk about the dangerous precedent
that this Administration has set by choosing to use political
science in making this decision versus the science that both
EPA and USDA has led us with, and then really just the
uncertainty that this causes producers like myself?
Mr. Twining. Sir, I always like to try to relate this back
to experiences all of us have every day in life. So when was
the last time any Committee Member had a headache? What did
they do? They went to the grocery store probably and bought a
bottle of ibuprofen and took two pills and got better in the
morning. Now, was there risk associated with doing that?
Absolutely. If you drank that whole bottle all at once, you
would probably be in the hospital having your stomach pumped
and you might die. But we as a society say ibuprofen, the risk
is worth the reward because it is closely studied, it is
labeled by a Federal agency, and we all understand and follow
the directions.
It is no different with pesticides. It is no different with
a product like Lorsban. Safe, effective use of these products
in accordance with label by pesticide applicators who are
trained and licensed--and to use that product, you have to
complete extensive training and obtain a license to use it.
When we take those tools away from our producers, we deny not
only our producers an option to better manage and more
efficiently produce food, we raise the cost for every American.
We cannot allow political science, opinions, and social media
to influence science. It is incumbent upon the Members of this
Committee to stand firm for science and to push back against
emotion and popular opinion and educate people on the use of
these tools.
Mr. Finstad. Yes, thank you for that. I couldn't agree with
you more.
Changing the subject here a little bit in the couple
seconds I have left here. Mr. Chairman, I want to say thank
you, and I really appreciate you bringing up the whole line
speed issue. And I would just comment that I am sending a
letter today to Secretary Vilsack urging the USDA to provide
certainty specifically for the pork processing plants by
issuing an extension of the NSIS time limited trial.\1\ I have
heard it loud and clear from producers in our state that it is
very important. And, Mr. Brown, thank you for bringing up this
issue today also.
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\1\ Editor's note: the letter referred to is located on p. 252.
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I would just close with this comment. I appreciate your
work here and you testifying. I hear loud and clear every day
that crop insurance is the number one tool that producers in
Minnesota really count on for that security and that risk
management. I heard it brought up here again today, and I will
tell you as a farmer, maybe on the hair younger side, and
especially watching my seven children coming into the farm
community, crop insurance is the number one tool for risk
management on our farm. And so I appreciate your willingness to
be here today and to really commit to that. And I would just
tell fellow Members here that I stand ready to help work on
ensuring that we have a safe and strong crop insurance
component to the farm bill. Thank you.
Mr. Brown. Mr. Chairman, if I could just thank Mr. Finstad
for sending that letter today. We greatly appreciate it. Our
growers appreciate it. And it will help us be competitive in
the international market, so thank you.
The Chairman. Very good. I thank the gentleman. I am now
pleased to recognize the gentlelady from Oregon, Congresswoman
Salinas, for 5 minutes.
Ms. Salinas. Thank you, Mr. Chairman, and thank you to our
panel.
So I heard from many of you today that weather irregularity
as the result of climate change is having a direct impact on
our ag sector. And in Oregon's 6th District, which I represent,
some of those impacts are from new problems and challenges like
extreme heat and smoke damage from wildfires and not just
increased frequency or severity of the natural disasters we
have previously had to endure.
Unfortunately, despite the value and size of our
agriculture sector--and I am definitely hearing this from a lot
of our growers; I just came back from my district work period
and met with a lot of them--were often left out of the
conversation because a lot of these products we produce are
less common. They are the specialty crops. And so Oregon is the
nation's leader in the production of hazelnuts, grass seed,
Christmas trees, and blueberries. And not only that, in Oregon,
a dozen commodities each have a production value of more than
$100 million. But as I mentioned, a lot of our growers really
can't take advantage of some of these protection programs.
So to Mr. Larew and Mr. Duvall, my question is for both of
you regarding margin protection insurance coverage. Would there
be value in expanding it to more commodities and more regions
of the country? Specifically, would it be possible to use this
coverage for specialty crops like those in Oregon?
Mr. Duvall. In our organization, our policy supports
updating and broadening the safety net for farmers to use. If
you are out there farming, regardless of what you are farming,
you deserve to have the same safety net as the others do.
Mr. Larew. Absolutely. I would just echo that. We strongly
support that as well and would just also add that I keep making
reference back to the work of the Food and Ag Climate Alliance
in the fact that specialty crop growers in particular who
sometimes don't always have easy ways to access conservation
programs, et cetera, that that be an issue that the Committee
consider as well.
Ms. Salinas. Thank you. And just to follow up on that a
little bit, as we try some of these new programs, I feel like
there should be some way to really assess and learn from the
start of the programs and try to figure out what can be
improved upon. So how have any of these programs that you have
just mentioned been received by your members, and what sort of
enhancements could we make to the margin protection to make it
more attractive to producers?
Mr. Duvall. I think what we talked to earlier is to make
sure that we update the cost of production and targets in it to
make sure it represents today's modern-day agriculture and the
cost.
Ms. Salinas. Thank you.
Mr. Larew. And I would just add that, whether we are
talking about the margin protection or whether we are talking
about whole farm type of--too often, access and entry into that
kind of protection requires--if you are a very diversified
producer, it can create additional burdens to even be able to
have the paperwork, and the coverage isn't ultimately worth it.
So ways to kind of streamline it, in addition to making sure
that it is tied to cost of production I think is important.
Ms. Salinas. Thank you. And that is exactly what I am
hearing from my growers.
So just shifting gears very quickly, I would like to touch
on the importance of SNAP. And I think we have heard from other
Members today. I think it is often overlooked that some of our
most food-insecure areas of the country and certainly in Oregon
are rural. And analysis from the USDA shows that eligible
Americans living in rural areas participate in SNAP at higher
rates than those living in some of the urban areas. And I
represent a particular rural area. Three, actually, of my five
counties in my district are rural, and about 29 percent of the
population are SNAP eligible. And so given that the economic
impacts of SNAP tend to be stronger in rural communities than
urban areas and employment, can you elaborate on how important
SNAP is to--and I think you have touched on this a little bit--
but how important SNAP is to rural communities and why the
economic impact is so great?
Mr. Duvall. Yes, ma'am. We come to you all and say we don't
really know what the needs are in the SNAP area. That is
something that you all have the resource to decide that, but we
fully support it. Our farmers and ranchers give thousands and
thousands of hours, hundreds of thousands of dollars of product
to food banks to help people all across this country, so we
believe in helping people in a time of need. So it is just
important to make sure that that safety net there is for the
people that are in that time in life where they need it, and
the safety net is there for us to assure that we would be able
to plant a crop next year, not to make a living, but plant a
crop. It is a safety net. And like I said earlier, crop
insurance is the cornerstone. And if it can be updated,
modernized, and broadened, it could be the cornerstone of every
farm out there.
Ms. Salinas. Thank you.
Mr. Larew. We know that our rural communities have a higher
percentage of senior citizens and families who too often maybe
in entrenched poverty for either lack of access to jobs, et
cetera. So food insecurity is definitely an issue that, much
like inflation, it doesn't discriminate. As someone from
Appalachia, I mean, we have long entrenched challenges there in
addition to great people and great resources. And so making
sure that that safety net is there available for all Americans
in need is important.
Ms. Salinas. Thank you. I yield back.
The Chairman. I thank the gentlelady. I now recognize the
gentleman from Tennessee, Congressman Rose, for 5 minutes.
Mr. Rose. Thank you, Chairman Thompson and Ranking Member
Scott, for holding this important hearing.
As a lifelong farmer and former Tennessee Commissioner of
agriculture and a new Member of the Agriculture Committee, I am
looking forward to working with my colleagues on both sides of
the aisle to develop solutions to the challenges that American
agriculture currently faces.
I want to go ahead and dive right in. I want to talk a
little bit more about the SEC's, Securities and Exchange
Commission's, proposed rule entitled, Enhancement and
Standardization of Climate-Related Disclosures for Investors,
that my colleagues have previously touched on today. In my
view, if this proposed rulemaking is allowed to be finalized,
it will have a devastating impact on farmers across the
country. Under the proposed rulemaking, farms would be required
to disclose considerable amounts of climate-related information
in order to do business with public companies. In May of last
year, I was proud to lead a bipartisan letter signed by well
over 100 Members of Congress to the Securities and Exchange
Commission, pushing back on this foolhardy proposed rulemaking.
Mr. Chairman, I ask unanimous consent to have the text of
my letter entered into the record.
The Chairman. Without objection.
[The letter referred to is located on p. 253.]
Mr. Rose. President Duvall, if this proposed rulemaking is
finalized, certainly you think that public companies, by and
large, will be willing to pay farmers more to account for the
increased compliance costs calculating their emissions, or do
you think that perhaps increased costs of this rulemaking will
simply be passed on to farmers?
Mr. Duvall. It will be passed on to farmers. And I can
promise you that because we have seen regulations before end up
in our laps that we had to pay for because some regulation from
Federal Government was handed to somebody above us in the
marketplace.
Mr. Rose. Sure. As farmers know, we are price-takers, not
price-setters, and I think you are right about that.
Economist Shelby Myers in a Market Intel report posted to
the American Farm Bureau website last year stated that the,
``SEC rule as proposed has the potential to require very
detailed information from each farm that is not captured
anywhere else, down to how many gallons of fuel are put in each
piece of machinery and each machine's emissions.''
President Duvall, as you are keenly aware, we face a huge
challenge attracting and keeping future farmers as more and
more young people choose not to or are unable to follow in
their parents' footsteps and leave the profession. Do you feel
that the burdensome and tedious prospect of potentially
requiring farmers to calculate each and every gallon of fuel
used on farms, as well as trying to decipher the emissions
output of a wide range of farm equipment from tractors to weed
eaters and even animals, might dampen the prospects of future
generations joining the farming profession?
Mr. Duvall. It most certainly will. And it will also force
smaller- to medium-sized farmers to going out of business where
larger farms might have the ability to do some of that or buy
the machinery that will collect the data for them. I mean, the
tentacles to this can be long and extensive into many areas of
rural America.
Mr. Rose. And in fact, amazingly, the rulemaking from the
SEC contemplates exactly forcing out providers or suppliers
that can't meet the obligations imposed by the rule.
Mr. Duvall, President Duvall, I would like to expand on
this issue a little bit and ask you if you could talk about the
efforts that American Farm Bureau is taking to spur interest in
the profession of farming for the next generation.
Mr. Duvall. Yes, we play an active role in all our youth
organizations. I mentioned earlier that we now participate in
4-H, FFA, AFA, and MANRRS and looking for others, and we
won't--like I am a product of the Leadership Development
Program. We want them to all know that when they come out of
those organizations, they can come to our organizations, we
will help them fine tune their God-given talent and let them be
a leader in this great industry that we know and love.
Mr. Rose. Thank you. Mr. Rosenbusch, one of the major
takeaways from your written testimony is that you highlighted
that the U.S. only accounts for about seven percent of global
fertilizer production. This is obviously a troubling statistic.
In The Fertilizer Institute's roadmap of solutions for Congress
to consider in your written testimony, you mentioned that
permit reform is essential for mining, construction of new
production facilities, and our infrastructure. Can you expand
on how permitting reform can help in these areas, especially as
it relates to the construction of new production facilities?
Mr. Rosenbusch. Yes, thank you, Congressman Rose. We are
exposed as a country to the global supply and demand for
fertilizer, and so anything we can do to help bolster domestic
production would be positive. But permitting is one of the big
challenges. So I referenced the example earlier of a phosphate
mine that a smaller business, small to medium business is
trying to open. Ten years they have been working at this and
$32 million for that mining operation to begin. The phosphate
is there. These resources are where God put them on Earth, and
so we can't go in and deposit potash today, but we do have
those phosphate reserves. And we just need to equip industry
with the ability to do it, with accountability for review,
timelines for review of these permitting, and ensure that we
can go into production as quickly as possible.
Mr. Rose. Thank you, Mr. Chairman. I yield back.
The Chairman. I thank the gentleman.
Now, I am pleased to recognize the son of a North Carolina
farmer, Mr. Davis, for 5 minutes.
Mr. Davis of North Carolina. Thank you so much, Chairman
Thompson, and to the Ranking Member for bringing us together
today and to the witnesses who are here today.
So I would like to start over the course of the last few
weeks in particular have gone way beyond to just have
conversations with farmers in my district. North Carolina
agriculture is still the leading industry and is extremely a
huge part of eastern North Carolina's economy and community.
Listening to the farmers in particular, I heard about
fertilizer, regulations, pesticides in particular, fuel costs,
so, I mean we hit on many of the things of that. I would like
to zoom in just a little bit more.
In particular, Mr. Rosenbusch, you highlight the importance
of onshore fertilizer production and national security and
agriculture economy, as we know and you have talked about
China, as gaining more and more market share, potentially
leaving the U.S. vulnerable in the event of the global
conflict. Among the roadmap, those legislative priorities, what
I am really trying to get a grasp of--and I want to be clear.
We realize there are things beyond control, our control. You
hit on it, the wait and see, the global markets. But my
question is within those things that are within our control,
what would you say is the greatest priority that could be most
impactful? Because this is something that I have heard so many
raise concerns about.
Mr. Rosenbusch. Yes, I will name a couple that come to
mind, in addition to what I have already mentioned. First of
all, unfortunately, potash and phosphate are not on our
critical minerals list. We have to do everything we can to make
sure those two are added back to the critical minerals list for
the United States. Second, I would say that our energy policy
is going to have a huge impact on fertilizer production. When
we think back to the pre-shale revolution, we had in the early
2000s 27 nitrogen plants that shut down because of the high
cost of natural gas. So affecting policies that deliver sound
energy solutions because that is the feedstock would be my
second.
And then I would just say, third is just anything that is,
as I think about an ag retail, any of the PSM and the RMP rules
and those just incremental regulations that add to the
complexity of doing business would be a third category of
things that we could focus on.
Mr. Davis of North Carolina. Any idea in terms of moving in
that direction, you talked about some decrease, and moreover
stabilizing things. Do you think we could really continue to
see decrease or at least stabilization?
Mr. Rosenbusch. You are talking about fertilizer prices?
Mr. Davis of North Carolina. Yes, prices.
Mr. Rosenbusch. Yes. So I am not allowed to talk about
prices----
Mr. Davis of North Carolina. Got you.
Mr. Rosenbusch.--but I will just generally say, as Zippy
mentioned, farmers have to put nitrogen down going into the
spring planting season, so I think some of the softening that
we have seen over the winter will begin to pick back up as
demand increases and we get closer to that planting season. I
think that approach to, well, let's see if we can get it at the
lowest possible prices is kind of what is out there in the
marketplace now. But when you just think about the fundamental
supply and demand, where we are with crop prices, I think you
will actually see things evolve as we go into spring and the
rest of the year. And at the end of the day, farmers at these
commodity prices have to maximize yield, and the way to do that
is with fertilizer.
Mr. Davis of North Carolina. Okay. Moving on, another
question going across the district--and this topic continues to
come up in terms of young people. I have traveled across the
district. I am hearing from constituents the lack of
opportunities to pursue careers that is vital to our local,
state, and national economy here, including we were talking
about transportation, trucking, agriculture, manufacturing. As
you know, the agriculture industry cannot function without
reliable transportation.
My question, Mr. Friedmann, would be can you give any sense
of what you think the Committee can do, the work to engage
either working with Transportation, T&I, to increase
opportunities for young people? And I heard Mr. Duvall--and
maybe I will just leave this as a comment at this point as we
run out of time. How do we really make this nexus disconnection
when there are so many job opportunities with the lack of our
students engaging? There is some disconnect here that is going
on.\2\ And I would leave it as a comment more, Mr. Chairman,
and I yield back.
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\2\ Editor's note: supplementary information submitted by Mr.
Friedman is located on p. 260.
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The Chairman. I thank the gentleman.
Now, I am pleased to recognize the gentleman from
California, Mr. LaMalfa, for 5 minutes.
Mr. LaMalfa. Thank you, Mr. Chairman. My apologies for
being in dueling committees here today so I have missed some of
the testimony and such, so I hope I am not redundant in my
questions. I wanted to throw this to Mr. Rosenbusch on
fertilizer, of course, being a globally traded product that is
of extreme importance to American ag, as we know, and in the
yields that we have made over the years. We have had, of course
the Ukraine situation, Russia, China, the whole works. And on
my own farm, we enjoyed at least triple the prices of
fertilizer of what we had been used to previously. Can you
discuss a little bit on the current Administration's actions
that are helping or harming the production and procurement of
the fertilizer we need, because we know how heavy an influence
energy has on the production of fertilizer, as well as just
getting it here. And what more could we be doing to have our
domestic production of it be a much higher percentage instead
of relying on imports?
Mr. Rosenbusch. Yes, thank you Congressman LaMalfa. And, of
course, your district with rice producers didn't quite enjoy
some of those same commodity prices. So it is especially
painful when you look at what is going on with inputs. So I
would say that, just repeating----
Mr. LaMalfa. Half my district didn't grow anything last
year because of the water supply, which is a whole other issue
we might get to cover, but go ahead.
Mr. Rosenbusch. Yes, well, water absolutely in California
is a big issue. Again, I think just looking at the restrictions
around permitting, critical minerals of potash and phosphate on
that critical mineral list, and anything related to energy that
I have already mentioned, are, of course, top of mind. I want
to maybe spend a second talking a little bit about some of the
U.S. Department of Agriculture's efforts here, and I would say,
generally speaking, their message is correct, and that is how
do we bolster more supply of fertilizer for the farmer? And I
think many of our small- to medium-size enterprises and
companies that were able to take advantage of some of those
grants appreciated those, and it does spur on innovation.
At the end of the day, however, $500 million does not
necessarily open up a nitrogen plant that may cost $2-$4
billion to build. What will really increase that capacity is
looking at that permitting reform, looking at NEPA, looking at
the energy policies that will ensure we have a safe and
abundant supply of natural gas as that feedstock. That is where
the numbers come from.
Mr. LaMalfa. Do you believe that in this country, in this
North American continent, that we have all the reserves of
materials that we need to more than take care of our own needs
in this country without imports? And could we competitively--if
we could streamline a little bit some of this permitting or to
flat out freeze and ban, would we be able to take ourselves
with very little import need?
Mr. Rosenbusch. So I----
Mr. LaMalfa. Fairly competitively, on cost, as well
availability? Sorry.
Mr. Rosenbusch. Yes, no, great question. I mean, on the
nitrogen phosphate side, yes. With the proper policies in
place, I think we can definitely take advantage of providing
those nutrients to the farmers. Potash, unfortunately, is a
little bit of a different story. Those are all resource-
dependent of where it has been placed on this planet. And while
we do have some potash reserves, we don't have nearly the
supply that we would need----
Mr. LaMalfa. Remind me where most of the potash is, sir?
Mr. Rosenbusch. Canada is where the largest supply of
potash is. And then, unfortunately, Belarus and Russia are two
and three, over----
Mr. LaMalfa. Yes.
Mr. Rosenbusch. Nearly 50 percent of the global potash
supply is in Belarus and Russia. And so we know why those
potash prices are being impacted when you think about the
restrictions around that.
Mr. LaMalfa. Well, we ought to be able to get along with
Canada, you would think. Yes. Thank you. Mr. Duvall?
Mr. Rosenbusch. But I will say, though, that that then
requires good transportation policy, rail, cross-border
transportation, et cetera.
Mr. LaMalfa. Yes, the railroads, we got to keep them
working, and they have had their issues lately.
So, Mr. Duvall, I just came from the Transportation and
Infrastructure hearing where we talked heavily about the Waters
of the United States regulation where we are working on a CRA
to put it back in its place here instead of it regulating every
ditch, every drop of water that falls from the sky seems to
somehow belong to the government and in their jurisdiction. Do
you think are we right to try and do the CRA right now or wait
for the Supreme Court? Because where I see it, this WOTUS is
extremely harmful right now. We only got a little time.
Mr. Duvall. Yes, we are. We urged the EPA not to turn this
new rule loose until the second case was ruled on, but they had
made a commitment and had to come out with that rule. Are we
wise to do it now or wait until the ruling comes out? I am not
qualified to answer that question. All I know is we are hoping
there is going to be a ruling out of Supreme Court that might
help us and that we can change that ruling to where it would
give us some clear rules so our farmers won't be burdened by
the regulation.
Mr. LaMalfa. Yes. Well, the hypocrisy of it--and I will
yield here in a second, Mr. Chairman--is that we have a rule in
place. EPA is trying to change it real quick and make it really
worse for ag and for production to little good effect, and then
wait for the Supreme Court. It seems to me if we just freeze
everything to what it was without them put the new rule in and
then gets a Supreme Court ruling on it, that might be pretty
good. That is more or less what we are trying to do. So thank
you for that. I yield back, Mr. Chairman.
The Chairman. I thank the gentleman. I am now pleased to
recognize the gentlelady from Illinois, Congresswoman
Budzinski.
Ms. Budzinski. Thank you, Mr. Chairman, and thank you to
the panelists for being here today.
My question is for Mr. Larew. I represent central and
southern Illinois. We are lead producers of corn and soybean.
So my question is really about biofuels, and if you can kind of
further elaborate on what you have testified to and the impact
on the development of biofuels that support rural communities.
Like so many of the communities that I have the opportunity to
represent, I often say that biofuels is kind of a three-prong
winner: One, it can reduce the price of gas for consumers; two,
it can reduce our carbon footprint; but also third, and really
importantly, it supports our family farmers in central and
southern Illinois.
And so I was really excited about the recent announcement
by United Airlines and the airline industry about how they are
looking at utilizing biofuels in jet fuel. And so I was just
hoping, Mr. Larew, if you could explain more about how these
types of investments and support for biofuels can support our
rural communities, create jobs, and other positives I think
that it can get at for our agricultural communities.
Mr. Larew. No, you are absolutely right. I think you said
it best, actually, that biofuels in general are a win-win-win.
It is great for our rural communities, again, talking a lot
about those diversified markets and making sure that farmers
have options. It returns that economic value back to the
community. It also does reduce cost to consumers at the pump,
which is obviously of great concern right now with inflation.
And then on top of that, it is also a win for the climate and
climate mitigation. If you want to look for ways to pull carbon
out of the process right now, and particularly in the fuel
space, replacing petroleum products with ethanol and biofuels
in general is the most immediate way to do that. And so I think
that this combination if you will, this triple win for
consumers and the public, for those communities and those
farmers and for sustainability and climate, I think puts
biofuels in a great spot. And this diversification is going to
continue. You made reference to sustainable aviation fuel. We
certainly want to make sure that, as we do look at that, that
our farmers are able to produce the feedstocks to go into that
and that we don't have restrictions that limit that
availability. So certainly, we are hopeful and we want to keep
making that move, but there continues to be a bright spot on
the horizon for biofuels in general. Thank you.
Ms. Budzinski. Thank you. And since I have a little bit
more time, maybe if I can ask an additional question. In my
district, I get the opportunity to represent the University of
Illinois. Archer-Daniels-Midland is in Decatur. We often talk
about how the Decatur-to-Champaign corridor is kind of the ag
tech corridor. And so one of my questions is really around
agricultural research, and this is for really anyone on the
panel. But, how can more investments in agricultural research
in the programs that the University of Illinois looking at in
precision farming, also further development in looking into
carbon capture sequestration as an important technology, how
can ag research and investment in that actually help then save
money for our family farmers through that technological
investment?
Mr. Duvall. Yes, those research dollars that are spent in
our land-grant colleges are so important to agriculture. It not
only keeps us on the cutting edge and makes our farmers
sustainable, it also discovers some of the basic discoveries
that industry picks up and refines and brings on to the farm to
help us do an even better job. So research and development
dollars are crucially important.
But I don't want to stop there. I want to talk about what
extension does. Since my grandfather, the extension agent has
been and still is the person that a small-, medium-sized farm
depends on to get that knowledge from the land-grant college to
the farm itself and that farm family.
Mr. Larew. I would just add, quite frankly, that while the
land-grant universities are an important spot for a lot of that
research and making sure that we are keeping that research
well-funded so that the innovation can be driven, I think that,
as we look ahead to the next farm bill, looking for also ways
that Congress can best spur that innovation as well, even with
big projects, whether it is the DARPA kind of ag version of
that, I think that there are opportunities in the farm bill to
make sure that we are looking big picture as well as the more
applied research.
Ms. Budzinski. Thank you, Mr. Chairman. I yield back my
time.
The Chairman. I thank the gentlelady.
Now, I am pleased to recognize the gentleman from South
Dakota, Mr. Johnson, for 5 minutes.
Mr. Johnson. Thank you, Mr. Chairman.
Mr. Friedmann, you mentioned in your testimony the
rulemaking proceeding before the FMC, which is flowing from
OSRA, which passed last year, you alluded to the fact that rule
promulgation proceedings are kind of always an opportunity for
the stakeholders to relitigate areas that maybe weren't fully
fleshed out by the legislation. Give us a sense on whether or
not you think the rulemaking proceeding is going well, whether
or not it is adhering to Congressional intent.
Mr. Friedmann. Depends on which rulemaking. The rulemaking
on what is the centerpiece is the detention demurrage, these
extra charges that the ocean carriers are imposing on U.S.
exporters, actually started off with a bang and was terrific. I
mean, instead of waiting till they did the rulemaking to
implement, they made it effective on the date you got that
thing passed and signed by the President, which is
unprecedented. So they made it effective right away.
They are moving forward, and in fact, they have added to
the very good criteria that you added to make sure the ocean
carrier has the decency to tell the exporter what they are
charging for those information elements. There were 12. There
are now 21. In other words, they went further, which is great.
There are some problems because maybe backsliding, they may
decide that you can impose detention demurrage charges on
truckers rather than exporters, so that needs to be watched.
But that is one that is very good.
On another critical element of your legislation where the
carriers were refusing to carry U.S. exports, U.S. agriculture
exports particularly and they would prefer to go back to Asia,
which is our biggest market, empty with a lot of empty
containers so they can pick up more of the stuff that we are
wearing, all the import stuff, and bring it back faster, that
left a lot of our agriculture stranded, and not just stranded
at the port, stranded all the way back in the middle of the
country, all throughout the center of the country.
They went through a rulemaking pretty quickly on that. And
we were pretty unhappy actually how quickly they moved through
that without any intention, it didn't appear, to actually
implement any limitations on the carrier's ability to refuse to
carry exports. And now they are coming back and doing it again.
To the extent you had a role in encouraging them to do that, we
appreciate that, but we do need to have that continued
oversight.
Mr. Johnson. And I do think it illustrates the fact that
there may yet be room, legislative space here, for another
bipartisan victory as we look at maybe an Ocean Shipping Reform
Act 2.0 to put some finer points on areas where maybe the FMC
didn't quite hit the target.
Mr. Friedmann. Correct. And, right now when we are not in
this pandemic environment where there is not this huge volume
of cargo coming in and overwhelming the ocean carriers, the
ports, the railroads, the trucks, there is plenty of
competition by the ocean carriers to carry U.S. agriculture
exports and forest products right now. But, things will change
and things will happen again where we are going to have to
assure there is competition, and we need to make sure that
there is a mechanism by the government to review ocean carrier
plans to this consolidation so that we don't wake up in a
couple of years when the economy turns again and there is more
demand and there are even fewer ocean carriers around. Right
now, as I said, not a problem, plenty of competition. All your
folks in South Dakota and all through the country are loving
the ocean carriers traveling from all over the world asking for
their cargo. But that is the opposite of what you were
addressing a year ago, right?
Mr. Johnson. Well, a free market is many buyers and many
sellers. Mr. Larew earlier was talking about kind of the
robustness of the market and how that can have an impact on
price certainly.
Mr. Friedmann. Yes.
Mr. Johnson. And there is no question about that.
Moving to Mr. Larew, I had seen that the Biden
Administration pivoted a little bit on FIFRA. They said new
Administration, kind of a new approach on Federal preemption of
pesticide labeling. I have some concerns about that. Where am I
wrong?
Mr. Larew. Yes, I don't know that you are wrong. We
certainly share those concerns, and we are watching it very
carefully. Really seeing the U.S. Solicitor General weighing in
on questions of labeling, too, is I think giving a lot of
questions about this Administration and how they are
approaching pesticide access and how we might see a patchwork
of regulations across the country. And I think in terms of from
the farmers' point of view, this is of great concern and should
be something that the Committee is looking at.
Mr. Johnson. I am out of time, which is tragic because I
have good stuff for Mr. Duvall and Mr. Brown, but I yield back,
sir.
The Chairman. I thank the gentleman for yielding back.
Now, I am pleased to recognize the gentleman from Illinois,
Mr. Sorensen, for 5 minutes.
Mr. Sorensen. Thank you, Mr. Chairman. And thank you all
for being here this afternoon. My name is Eric Sorensen, and I
represent the farm families and the communities in Illinois'
17th Congressional District. I was born in this district where
farming is much more than growing crops and raising livestock.
It puts food on the table, fuel in our cars, and clothes on our
backs. As my fellow Illinois colleague Ms. Budzinski mentioned,
our state, Illinois, is the leading soybean producer and the
second largest corn producer in our country. That is why it is
imperative that the upcoming farm bill preserves crop insurance
programs and fortifies the supply chains that we saw break.
It also must include robust investment in agricultural
research that focuses on improving farm and community
resilience so that we can address the challenges of resource
quality and enrich productivity by growing more on less land
with fewer inputs. Securing these provisions in the upcoming
farm bill and ensuring that the $43.8 billion in the Inflation
Reduction Act reaches our farmers and ranchers, this allows us
to be responsible stewards of our land, our water, our
livestock, while we foster a thriving agricultural economy.
Located in my district, the Jakobs Brothers Farms have been
in operation for three generations. They raise beef cattle,
corn, wheat, soybeans, and rye. Sourcing parts for their farm
equipment has been a challenge. And also the rising costs of
pesticides and fertilizer are a great concern to them.
Mr. Rosenbusch and Mr. Larew, what can Congress do today to
strengthen our supply chains, to keep costs manageable and
equipment parts accessible for farmers like the Jakobs?
Mr. Larew. Again, it is a great question, and we could
probably spend the better part of the day talking about that.
But just to summarize very quickly, I would just again stress
for the challenges that you presented, it is much about making
sure that there is fair competition and access out there in the
markets. When you have a fully functioning and competitive
market, that makes sure that these laws of supply and demand
that we talked about a lot here are actually working and that
we have true competition. And in the absence of that, we run
into all sorts of challenges. That is on top of any kind of
supply chain disruptions that we have.
So as far as actions that Congress can take right now, it
is ensuring that we are doing everything possible to create
that fair playing field out there, and then I would say on top
of that, many of the things that Mr. Rosenbusch talked about in
terms of creating access for even more domestic access.
Mr. Rosenbusch. So for the sake of not repeating some of
the things I have said, I would just point out that there is a
piece of legislation in the Senate side that Senator Marshall
has introduced to address this exact topic called the SUSTAINS
Act. So if there is one thing Congress could do is I would love
for someone here in the House to pick up the companion bill
here and push that forward. That would make a huge impact.
Mr. Sorensen. My background is being the local
meteorologist. I talked about climate change on television such
that I didn't realize that our farm families were the ones that
were watching me. They couldn't believe anybody out there, but
they couldn't believe Eric Sorensen for this, and they have
come to me, and they have said, ``Eric, we trust that you are
going to listen because so many people in Washington don't
listen to us because we know things are changing, and we want
to stop the politicization of climate.'' How can we all come
together?
Mr. Larew. I would take this opportunity to again make
reference to the Food and Agriculture Climate Alliance. This is
an alliance that really is unique in many ways. We have talked
about the fact that Farmers Union is joined by Farm Bureau at
that table, but also with the environmental community, with the
food manufacturers community and forestry, as well as many in
the conservation community have all come together. Many of the
recommendations that we have made forward for the upcoming farm
bill were all consensus. They were all focused on making sure
that they were science-based, incentive-based, and really,
where possible, create new market opportunities here. So if we
are approaching climate with that kind of consensus and keeping
a focus on the science, I think we would go a long way.
Mr. Sorensen. Thank you, Mr. Chairman. I yield back.
The Chairman. I thank the gentleman.
Now, I am pleased to recognize the gentleman from Iowa, Mr.
Nunn, for 5 minutes.
Mr. Nunn. Thank you, Mr. Chairman. And good afternoon,
team. I appreciate you being out here in Washington for this. I
know we all like to be looking at getting back into the field
as soon as it thaws here.
President Duvall, I am going to be coming to you first, my
friend. As a Member of Iowa's Third Congressional District and
part of a family of century farmers in our home state, I have
heard from countless farmers on the impact of inflation that
has been highlighted here today. Iowa's producers and their
ability to both feed and fuel, the supply chain disruptions,
the labor shortages, Russia's recent invasion of Ukraine and
the impact on fertilizer have all contributed to a significant
hike in the price of crucial farm inputs like fuel. In just 2
years, the average price of a gallon of diesel fuel has
increased by 95 percent, making it hard for everybody to not
only get to that field but also to be able to harvest and feed
our families. And I have six kids, so that is a big impact.
Additionally, in 2022, the average price of gasoline
reached its highest level on record ever. As input costs
continue to rise, farmers' abilities to ensure the continuation
of abundant food supply decreases. Iowa is the number one
producer of biofuels, providing a homegrown solution that
positively impacts our environment, our economy, and American
producers. However, the nation enters the summer of 2023 still
having a ban on year-round ethanol blends that constrict our
biofuel producers.
So, Zippy, one of the things I want to ask you about is how
would a year-round E15 relieve the current pressure on
inflation and place our farmers and consumers in a better
position?
Mr. Duvall. Well, it would lower the cost to consumers.
Mr. Nunn. Yes, sir.
Mr. Duvall. It would bolster the rural communities where
they are growing those soybeans and corn. And that is a simple
fact. There is a--I call it--I am wearing my cotton tie today.
There is an infrastructure around ethanol, and there is a big
infrastructure around cotton. And it affects those rural
communities extremely. And when you hold that back, it limits
their ability to thrive and be better.
Mr. Nunn. We are going to get you a corn tie to go with
that cotton tie. Thanks, Mr. President.
Mr. Brown, I would like to chat with you a little bit as
well here. My home state gets the privilege of leading in egg
production. But with a spike in egg prices, Highly Pathogenic
Avian Influenza has received a great deal of attention in news
reports across the country recently. I would like to talk about
how that disease has affected specifically the chicken
industry. Is there anything the industry, Congress, or USDA
needs to be considering to best address that problem today?
Mr. Brown. Thank you for your question. Between the egg
layer industry, the turkey industry, and the chicken industry,
we have been the least affected. A lot of that has to do with
our biosecurity procedures, our housing, and our market, the
way we move our birds to market more quickly. But what we can
do is continue to support APHIS, who I will give high marks to
for what they have been out there and doing and working with
industry.
Another thing that I would like to raise while we are here
is that the chicken meat industry moves about 380 million eggs
a year into rendering because up until 2009 those eggs were
allowed to be used in commerce for egg hatching and
pasteurization, so they are totally safe. But FDA came up with
a rule in 2009 knocked us out. Well, 380 million birds a year,
if they could go to pasteurization, can help you respond to
your constituents when they are talking about the price of eggs
being too high, that is a very high volume. And if we go back
to 2009 when that rule was implemented to today, that is five
billion birds. I think my staff tells me 5.3 billion eggs. So
that is one thing this Committee could consider.
Mr. Nunn. Mr. Brown, thank you very much. I will just end
by saying to all the farmers, the ranchers, the growers, that
you represent collectively on both sides of the aisle. Thank
you much for your service and your advocacy for them out here.
I hope that this Committee can do right by them. I wish you all
a good growing season coming up.
With that, Mr. Chairman, I yield back my time.
The Chairman. All right. I thank the gentleman.
Now, I am pleased to recognize the gentleman from New
Mexico, Mr. Vasquez, for 5 minutes.
Mr. Vasquez. Thank you, Mr. Chairman. My name is Gabe
Vasquez, and I represent the Second District of New Mexico. We
are storied dryland farmers that grow the prized Hatch chili
that many of us put on our enchiladas across the country to go
with some of that delicious chicken and livestock and beef, as
well as onion, cotton, corn, alfalfa, pecans, and more.
Today's hearing focuses on issues incredibly important to
the farmers and ranchers in my district, and that is the rising
cost of everything. New Mexico is a vital part of the American
agricultural landscape, but our farmers in our rural areas are
hit harder by inflation and uncertainty than in other parts of
the country.
I just recently met with dairy farmers in Dona Ana and in
Luna Counties. And one of the most common problems I heard was
their inability to access Federal programs or qualify for
Federal programs and how expensive it was to keep their
operations viable. The farms and ranches in my district are
more than just farms and ranches. They are part of the fabric
of our culture and our identity, and that includes our dairies.
And so when they suffer, our entire district and community
suffer.
Now, specific to dairies, my question is here for Mr.
Larew. Mr. Larew, in your opinion, when it comes to the Federal
Milk Marketing Orders, do those needs to be reformed or
reworked? And if so, what are some suggestions to rework them
to make that program more viable for our existing dairy
farmers?
Mr. Larew. Well, I appreciate the question, and I would
just--first, I am smiling a little bit only because I never
anticipated being on this side of this table taking a question
on Federal Milk Marketing Orders when I was in a past life have
been on the back side there.
But the question is, is that we do have a lot of work to do
on Federal Milk Marketing Orders, and you talk about the
dairymen and dairy producers in New Mexico, the challenges
exist all across the country. I think much of the work that is
also being done by other farm organizations in this space I
think will help lead the way.
The bottom line, though, for dairy producers, right, is
making sure that they can cover their cost and actually be able
to return a little bit of money there. So whether it is
questions around improving Federal Order hearings and the way
that voting currently actually limits individual farmer's input
into that, as well as Order reform itself, I think that is
something that we are very, very much looking forward to
engaging this Committee on.
Mr. Vasquez. Thank you, Mr. Larew. In a recent study
conducted by New Mexico State University showed about 15
percent loss of dairy farms over the 2 few years in New Mexico.
A large part of that from what I have heard from producers is
the increased feed and fertilizer costs, as well as supply
chain disruptions. Under the Dairy Margin Coverage Program,
very-small farms are eligible for assistance, but many farms
are just large enough to not qualify for coverage, contributing
to the decline in dairy farms in New Mexico and in my district.
My next question is for Mr. Duvall. Mr. Duvall, does the
Farm Bureau have an opinion of how the DMC program could be
changed to include dairy farms in this coverage gap?
Mr. Duvall. Well, first off, go back to my original
statement, we want it to be modernized and upgraded, and in
doing that, we think that would take care of that problem. And
also, we a couple of years ago went to Federal crop and asked
if we could create a product for dairy farmers that is out
there right now that can be purchased for farmers to help them,
and it took several years to get it done, but there is
something over and above that.
Mr. Vasquez. Thank you so much. Now, when the government
calculates inflation, it only takes into account the prices
that urban Americans pay into account. This means that 46
million Americans living in districts like mine are invisible
when we talk about the challenges of rising costs and
inflation. To any one of our panelists, how can we address the
disparity of rural versus urban inflation and provide relief
and make good policy that helps support rural Americans that
live outside of major cities?
Mr. Larew. It is a good question. I am not sure I have--I
would love to follow up as well.\3\ But, I appreciate you
raising this question about the way that they measure inflation
and that it typically certainly underrepresents, at best, the
impact on our rural communities. In recent conversation with
the Federal Reserve out of Kansas City, they were highlighting
this question and are looking internally about ways to do that.
But whatever we can do to make sure that the true picture and
the true impact and cost in rural communities is able to be
seen more clearly I think would certainly be something we
support.
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\3\ Editor's note: the information referred to is located on p.
268.
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Mr. Vasquez. Thank you so much, Mr. Larew. Thank you so
much, gentlemen, for your advocacy and your support for our
farmers and ranchers in New Mexico's Second District, I greatly
appreciate it.
Thank you, Mr. Chairman. I yield back.
The Chairman. I thank the gentleman. I now recognize the
gentleman from Missouri, Mr. Alford, for 5 minutes.
Mr. Alford. Thank you, Mr. Chairman. I am honored to be
here today representing Missouri's farmers' and ranchers'
95,000 farms in the great State of Missouri, number two in the
nation. We recently introduced our first piece of legislation,
the Amplifying Processing of Livestock in the United States
Act, called the A-PLUS Act (H.R. 530). Our bill works to fix
regulatory roadblocks, increasing meat processing capacity, and
really allow livestock auction market owners to invest in
smaller regional packing facilities.
President Duvall, I would like to start with you today. In
your testimony, you talked about several regulations that
burden our farmers and ranchers instead of really helping them.
In your estimation, how would the A-PLUS Act modernize some of
these outdated rules and regulations?
Mr. Duvall. Well, one, I am a cow-calf producer, and they
are the last ones to get talked about. But I promise you that
feeder and that packer can't do it without us because we are
producing the calves for him. We need transparency to be able
to see what the market is doing so that we can better market
our animals out there.
But to get to your question, that Act allowing those
livestock markets to be able to participate in, we encourage
that growth of that middle- to small-size processor. And we
think it would tremendously help our local cow-calf guys and
our local, small family feeders to be able to utilize that. And
I guess the regulation around that would be whether or not
there are enough Federal inspectors to go around to doing that,
and are we really using technology to its fullest in that
location? So I think there is a big question around that.
Mr. Alford. Thank you. Very good, sir.
Mr. Twining, in your written testimony, you mentioned that
county-level bans on crop protection tools are ineffective,
inefficient, and overly broad measures. It is something that
farmers in our district are facing each and every day. Just
this past year, there was a county-level ban on the use of
Enlist One and Enlist Duo in 200 counties in America, including
five in our district due to the presence of the American
burying beetle. The EPA did decide to lift the ban in 134 of
those counties in March of 2022. The problem was there was a
lot of confusion and uncertainty in that among the producers
right before the start of the growing season. So can you talk
more about why county-level bans are a bad idea to begin with?
Mr. Twining. This is something that, unfortunately, we face
frequently, and it is very disruptive to business. You can't
operate in an environment where you go from one county to the
next and the rules are different. And there is not transparency
on some of these and why it is important that the EPA's
Endangered Species Act process include the end-users and be
flexible for local conditions and specific cropping systems.
The best analogy I could give you if you were trying to teach a
high school class of drivers how to drive and every county had
a different set of rules and regulations of the road, you would
never be successful. We can't run a business in an environment
like that, and neither can growers or producers.
Mr. Alford. Very good point. My last question goes to Mr.
Friedmann. You had talked about earlier--and I am sorry we are
in and out as Congresspeople because we are in three different
committees at one time. We are trying to spin some plates here,
but these are all very important issues. You mentioned earlier
in your testimony there are ten ocean carriers in existence,
right? None of those are U.S.-owned. Is that what you said? How
many are owned or controlled by the Communist Chinese
Government?
Mr. Friedmann. There are two major [inaudible].
Mr. Alford. So 20 percent. We are also blessed to be on the
House Armed Services Committee, and this information that has
come out--really, it is been around for several years now--that
China is the number one threat to our national security. If we
were to have a conflict with China in the next decade or so, it
is largely going to be a sea war. What impact would that have
on the distributions of goods coming in and out of America on
these transport ships?
Mr. Friedmann. I think we have adequate carriage, the rest
of the world does, because all these other ocean carriers are
owned by European countries and Taiwan as well and Japan,
Singapore. So, I think there is adequate coverage because, in
fact, I don't think between COSCO and OCL that they have quite
20 percent because one of those--COSCO is big. OCL is much
smaller. So I think there is adequate coverage if we needed to
with the other carriers. And there is some additional capacity,
as we learned during the pandemic, that will come in to service
if there is a demand for it.
Mr. Alford. Thank you. Thank you to all our witnesses.
Thank you for being here today. Mr. Chairman, I yield back.
The Chairman. I thank the gentleman.
I am now pleased to recognize gentleman from Illinois, Mr.
Jackson, for 5 minutes.
Mr. Jackson of Illinois. Thank you, Chairman Thompson,
honored to be on the Committee, and Ranking Member Scott. This,
too, is my first Agriculture Committee hearing, serving
Illinois' First Congressional District in a district that is
seeing an expansion of a food desert that we have borne the
brunt of the consolidation efforts in the food industry. Mr.
Larew, could you please speak to that and how we can turn this
trend around?
Mr. Larew. Yes, well, food deserts wherever they occur,
remain an enormous challenge. We know that in rural America in
lots of places where farmer communities have so far to drive to
get access to any sort of food grocery store of any size. The
larger question here from our perspective is, again, it is a
theme that we are striking. But this question of a focus on
consolidation and efficiency at the expense of making sure that
there is a diversified access, in its case, access to food in
these food deserts, remains an important challenge. National
Farmers Union is a proud member of the Alliance to End Hunger
where we work closely with a number of private companies,
public companies, faith-based organizations to support, again,
on these big challenges. As we look ahead to the next farm
bill, we are certainly willing to work with you and others to
find ways to alleviate the challenge and the problem.
Mr. Jackson of Illinois. Thank you. A question to the
general panel, are any of you concerned in your industry with
foreign investment in our agricultural industry?
Mr. Larew. We have 50 percent of our beef in the country
being processed by Brazilians. We have a large percentage of
much of the rest of our protein being sourced by either
Chinese-owned companies, et cetera. The question around
consolidation in agriculture is not just one about monopolies
or near monopolies and the impact that that has on the free
market in competition, but it is also--we keep throwing around
this national security and food security, which absolutely this
is about. And so to have so much of that processing and that
much control in the hands of others I think raises big
questions.
Mr. Jackson of Illinois. Last question, do foreign
investors have a cost and a competitive advantage structurally
against our small local farmers in the United States? And if
so, what can we do to level the playing field? Well, for
example, I have seen in catfish prices and other things that
are shipped in from China and other places, that how are they
able to ship food back into the United States? That is a
scavenger fish. We are importing food from so many other
countries. Is there a structural competitive advantage that
they share over American farmers?
Mr. Duvall. So I would say that, yes, sir, there is in
certain areas of the world where we have to abide by certain
regulations as put out by the Federal Government. Those
countries may or may not have and whether or not we have the
capability to really inspect to make sure they are abiding by
the same rules that we are, and I would doubt that very
seriously. I don't have any proven statistics to prove that,
but there are a lot of regulations we have to deal with,
especially when it comes to fruits and vegetables and what they
have to do to send it on to the market. And there are a lot of
competitive fruits and vegetables coming in here and being
dumped on our market and causing real harm to our farmers.
Mr. Brown. Sir, and I would add that a lot of the
competitive disadvantages that we face against foreign
competitors are caused by our own government. I mentioned to
you earlier or to the Committee about the line speed issue. We
got our hands tied behind our back while other nations can
operate at 30 percent more.
And, Mr. Chairman, I am not looking to pick a scab or start
another war at this table or in this Committee room, but talk
about regulations, and everybody loves the biofuels and it all
sounds great and dandy, but when that was put forward in 2007
in Bush 43's Administration and put into effect in 2008, one of
the largest drivers of concentration in the chicken industry
was the ethanol rule. Thirteen companies in 2 years, gone. That
is all I have to say about it.
Mr. Jackson of Illinois. Thank you. I yield my time back.
Thank you, Chairman Thompson.
The Chairman. I thank the gentleman. Now I am pleased to
recognize the gentleman from Wisconsin, Mr. Van Orden for 5
minutes.
Mr. Van Orden. Thank you, Mr. Chairman, and thank all of
you for coming today. You guys are absolute rock stars. I
appreciate it greatly.
I want you to indulge me for a second so that I can frame
this problem set from a slightly different perspective. I
firmly believe that food security is national security and that
the Biden Administration is jeopardizing our national security
with their war on energy that is making it more difficult for
our farmers to feed the world, our nation, and that includes
our military. Napoleon Bonaparte famously said that an army
marches on its stomach, and that is a true statement.
Mr. Rosenbusch, I would like to address this to you and
would like your thoughts. The fertilizer market appears to have
stabilized, but with the current international environment and
taking in mind your quote, fertilizer is a globally traded
commodity subject to international pressures and geopolitical
events, I do not have confidence that this market will stay
stable. In your written testimony, you presented several
different charts demonstrating that China and Russia and in
your verbal statement, you said Belarus, with the production of
potash holds a strategic advantage over the United States of
America with their fertilizer production and distribution
around the world. You point out that 90 percent of the
fertilizer is used outside of the United States of America. And
my concern is that through foreign aid the United States is
providing food products--beans, rice, and corn--to the world
where China and Russia are following the adage of give a man a
fish, you feed him for a day, teach them how to fish and you
feed them for a lifetime.
So my question to you is this. Do you believe if we were to
onshore our fertilizer industry and production capacity,
understanding that the majority of potash will have to come
from Canada, who are our friends, do you believe that we could
potentially remove a strategic advantage of China and Russia on
the world stage and increase our strategic advantage globally?
And if so, how would you propose doing so?
Mr. Rosenbusch. Yes, great question. I will just point out,
it has been interesting to watch the China decisions around
their export restrictions and a lot of speculation as to why
they did that. Obviously, the line is to ensure that their
farmers have the fertilizers that they need.
Mr. Van Orden. Right.
Mr. Rosenbusch. So if you apply that to our thinking, I
will say that we are a net importer of fertilizer, and we do
need that supply in order to give farmers the nutrients that
they need, while also facilitating expansion of our own self-
reliance in fertilizer. We talk about the capital-intensive
nature of these investments, and the markets are cyclical. I
mean, we went through a period of years before where we
currently are where a lot of fertilizer companies--and I am
sure Mike can comment to this, too--were losing a lot of money
and were not profitable. So I think that cyclical nature of the
industry is common. And of course, we are at a different swing
for it right now. But the key is we have to have that
regulatory certainty so that we can make those investments in
these capital-intensive facilities so that we can increase our
own direct domestic capacity.
Mr. Van Orden. Yes, sir. I understand that we need
regulatory certainty. But would you potentially propose a large
capital investment in the domestic fertilizer industry?
Mr. Rosenbusch. By the government?
Mr. Van Orden. Yes.
Mr. Rosenbusch. Well, I think our companies are adequately
equipped to make those investments. I don't know that we need
to nationalize fertilizer manufacturing and keep that as a free
market, free enterprise system. I think you can just look at
India and see the challenges when you nationalize a fertilizer
system. So they procure all of their nutrients as a central
government, then subsidize it and provide it to the farmer.
They particularly had a really difficult time because China
locked them out of the market, and then they had to go source
all of that on a global basis, in addition to what they do.
Mr. Van Orden. That is correct.
Mr. Rosenbusch. So I----
Mr. Van Orden. So you have confidence that the private
industry would be able to produce enough capital in order to
onshore our fertilizer industry in case of a national emergency
or in order to give us a strategic advantage over China and
Russia globally. Is that correct?
Mr. Rosenbusch. I believe that they can make those
investments if the permitting and the things that they need to
reach those investments can be facilitated with the caveat that
they are resource-dependent. We don't have potash reserves
here, and we will continue to rely on our friends from the
North.
Mr. Van Orden. Right. Well, as a conservative Republican, I
appreciate your point of view. I yield back.
The Chairman. I thank gentleman for yielding back.
I think, as most folks are aware, votes are to be called.
There will be two votes called at 1:30. The first one will be
15 minutes or so. So even calculating that it is not always
just 15 minutes, I apologize. I want to get everybody an
opportunity to ask questions, but we are going to reduce the
time to 4 minutes. And I apologize for that, but that is the
result of an outstanding and great participation today, which
is much appreciated.
And so I am pleased to recognize the gentleman from Texas,
Mr. Casar, for 4 minutes.
Mr. Casar. Thank you, Mr. Chairman. And thank you to the
witnesses for being here today. And I want to keep working off
the question that my friend Congressman Jackson brought up. I
represent Texas Congressional District 35, which stretches from
east Austin down to the west side of San Antonio. And my
district includes several food deserts that have made it
difficult for people in my community to access high-quality
food. We also have a lot of folks that are working class and
low-income in some of the most expensive areas of my state. One
example is Del Valle community, an area of thousands of people
that does not have a single major grocery store in it.
So, Mr. Larew, in your written testimony, you warn about
the increasing impact of consolidation, declining competition,
and how that is having impact on food deserts, food prices, and
food access, impacting communities like those that I represent.
Can you talk us through what Congress can do and what this
Committee can do to reduce consolidation, promote food access,
lower costs, and support communities like Del Valle where it is
real expensive to live there, food costs going up has a real
impact, and they don't even have a major grocery store.
Mr. Larew. Yes, thank you for raising the issue again here.
I think that this Committee plays an important role in making
sure that there is open and fair competition, even within this
Committee's jurisdiction, whether that is everything from
making sure that there are fair rules and fair treatment within
the livestock sector, for example, through the Packers and
Stockyards Act, making sure that we are investing in additional
processing and food distribution chains out there. All have
these chains, whether we are talking about the groceries or the
suppliers, to the groceries down to the processors, producers,
ultimately finding ways to increase the investment in building
out that infrastructure is going to be critical.
Ultimately, the big questions are going to be beyond this
Committee's scope in the case of the antitrust laws that,
again, have been on the books for well over 100 years. But it
needs some enforcement review that we haven't seen for several
decades. So it is a big question, but I think that there are
clear things that this Committee can be doing to be effective.
Mr. Casar. Thank you. Mr. Chairman, I yield back.
The Chairman. I thank the gentleman and now pleased to
recognize the gentleman from Ohio, Mr. Miller, for 4 minutes.
Mr. Miller of Ohio. Thank you. Thank you, Mr. Chairman. And
thank you to the Ranking Member, and thank you for all the
panel today and your honesty.
Farming provides one out of seven jobs in Ohio and is the
number one contributor to our state's economy. However, Ohio
and U.S. farmers continue to face economic uncertainty due to
unprecedented inflationary input costs, diminishing trade
opportunities, and ever-increasing regulatory framework at a
time when our nation's agricultural producers are called to
meet global food insecurities.
Mr. Duvall, you also raised challenges for the American
agriculture in your testimony detailing beginning with losses
experienced from the trade war with China, pandemic lockdown,
supply chain disruptions, and record input costs. Farmers and
ranchers have been facing unprecedented volatility in recent
years. I note that USDA has recently projected total U.S.
exports to decrease eight percent over the next 10 years,
causing more uncertainty. Also, United States dairy farmers are
being impacted by unfair trade practices as Canada, which is
our friend to the North but sometimes not so much, is not
living up to its own obligations under the USMCA despite a
negative ruling in a dispute resolution process concerning
dairy market access. Exports are critical to the economic
viability of us dairy farmers today with \1/6\ of all U.S. milk
is sold commercially around the world and dairy products. When
exports increase, the entire supply chain benefits.
Ohio State University has correlated that inflation and
high food costs can have an impact on the United States'
agricultural trade as when commodity input costs rise and food
prices increase, trading partners pull back purchasing,
therefore reducing U.S. trading opportunities for United States
farmers.
So in conclusion, can you share what the loss of trading
opportunities may mean for the American agricultural sector and
every American and individual across this world?
Mr. Duvall. It would be tremendous, and I can't speak
exactly to dairy, but every third row of corn and every third
row of soybeans either go to production of fuel that is going
to be exported somewhere else. Being able to trade with other
countries opens up the market for us to be able to be more
productive, more resilient, and more sustainable on our farms.
And we have depended on trade for many, many years. And when it
is disrupted like we have seen here lately, especially before
the Ocean Shipping Reform Act, it cost farmers and everyone
tremendous amounts of money because exactly what my friend here
to my right said, when we can't ship it overseas, it will go
back into our local market and depress the prices to farmers.
Mr. Miller of Ohio. Thank you very much. And I don't mean
to pick on you, but, Mr. Duvall, in your testimony, which I
enjoyed a lot, you state inflation is slashing the purchasing
power of American consumers and weakening the economy, which
both undercuts demand for farm products and lowers prices.
Inflation is driving up the price of groceries in Ohio. We see
it every day in the Seventh District. Increasingly pinching
Ohioans' budgets, farmers and consumers alike are suffering
from spiking food prices. As USDA reports, food at home prices
increased by 11.4 percent in 2022, it is incredible, with costs
continuing to rise 7.1 percent this far in 2023.
Mr. Duvall, can you elaborate on how inflation can increase
the cost of inputs, which can reduce farmers' economic
viability, and in the end make it more difficult to provide
affordable food for our families and to make it affordable for
all of you to help us?
Mr. Duvall. Good observation. And if you just take a family
and what you have to purchase to get that family through the
day and compare it to what a farmer has to spend to produce
that food that they are going to produce, I mean, it is
tremendous of what percentage increase that we have seen from
fertilizer to fuel and everything that we do, and then you
compound it with over-regulation, it even makes it more
difficult for farmers to survive. And in that increase the food
people are consuming or paying for food at the grocery store,
very little if none of that is getting back to the farmer.
Mr. Miller of Ohio. Thank you, sir. And, Mr. Chairman, I
yield back.
The Chairman. I thank the gentleman. I am now pleased to
recognize for 4 minutes the gentlelady from Hawaii, Ms. Tokuda.
Ms. Tokuda. Thank you, Mr. Chairman. I know we have a lot
to talk about ag. I would welcome all of you to come to my home
State of Hawaii anytime, and we can show you what ag is all
about.
The Chairman. I accept. I think you will get some
volunteers.
Ms. Tokuda. There we go. Thank you very much to the
witnesses for being here. According to the U.S. Department of
Agriculture's Economic Research Service, about 40 percent of
farmland in the United States is rented, most of it owned by
landowners, as you know, who are not actively involved in
farming. In September 2022, a survey of the National Young
Farmers Coalition, young farmers named finding affordable land
for purchase as one of the top barriers and challenges last
year.
Now, to all of you, the cost of land and rent, especially
in my home State of Hawaii, is a barrier for both new as well
as longtime family farmers, new farmers, and a major expense
for small family farms who lease their lands. Do any of your
organizations or any of you here at the panel have any concerns
about private equity and nonagricultural corporate investors
purchasing agricultural land? As we know, Bill Gates owns a
majority, a vast majority of the farmland here in the United
States. What do you feel has to be done? What is the solution
for farmers that are looking at the cost of land as a barrier?
Mr. Larew. Okay. I will go ahead and start because it is a
huge question, and I am really glad that you raised the
question here. But particularly for those new entrants and
those young and beginning farmers, land access and land
affordability is absolutely paramount. And it is been an issue
for a number of years obviously. And I think we are all
continuing to look for what is probably a whole collection of
solutions in this process.
But I think that there are a few things that we can
continue to look at. There are some states, through their
Departments of Agriculture and their state legislatures, that
have been creative in finding ways for perhaps retiring or
farmers who want to make that transition, creating incentives
and reducing some of the barriers that currently exist out
there to allow these young farmers to come into the business
perhaps without that overhead.
I think that this other question that you raise about those
who are farming on rented land raises a lot of other questions.
And I brought it up a number of times here, but I think Zippy
and I are proud of the work that the Food and Ag Climate
Alliance has done on the question of rented land. Oftentimes,
there are disincentives for folks to participate in some of the
conservation programs. And so whether we are talking about new
and beginning farmers and those looking for land access or
those who currently rent land, making sure that we are finding
solutions to all those challenges.
Ms. Tokuda. Zippy?
Mr. Duvall. And one of the things, I think it was in the
recommendations of the factors that we increase the lending
limits at USDA on the young and beginning farmers because those
limits aren't the reality of what it would cost to try to go
into business. And it would be an extremely small farm if
limited to the limits they have on it. Farm land ownership is a
discussion that farmers have among themselves, and it crosses a
line of private property rights and who should be able to tell
me, well, I can sell it to the highest bidder, regardless of
where they come from, is a big debate. But we should, as a
country, be concerned about what the ownership is of our
farmland because it goes back to who is actually feeding us.
Ms. Tokuda. Absolutely. I will say, especially in Hawaii
where we are very land-limited this is a big issue for us as
well. I know I am running out of time, but I would put out
there that my concern in a state that is hit by drought,
flooding, wind damage, volcanoes, I am concerned about current
disaster aid programs and Federal crop insurance actually being
effective. Does it makes sense for farmers given how some of
the reimbursements are done? Sometimes it is not a disaster
declaration, but it is a disaster for our farm, so I think we
have to make sure we are flexible and nimble enough to make
sure we take care of those who take care of us, so thank you
for being here.
Mr. Chairman?
The Chairman. I thank the gentlelady.
Now, I am pleased to recognize the gentlelady from Florida,
Mrs. Cammack, for 4 minutes.
Mrs. Cammack. Hello.
The Chairman. Who didn't quite make it to her chair.
Whoops.
Mrs. Cammack. [inaudible]. Okay. Can you hear me? Okay.
They have us packed in here like sardines.
As the lone Republican representative for the Sunshine
State--I can't believe I am doing this standing, Mr. Chairman.
This is a first. We are faced with a couple of unique issues.
As so many of you guys know, Florida is home to 300 specialty
crops, and one of the things that is particularly concerning is
the fact that we don't have a seasonal or perishable provision
as part of the USMCA agreement. I am hopeful that we can
rectify that in the upcoming farm bill.
And I know we have had a lot of discussion today, very
productive, about the regulatory I will call it regime because
to me that is really what it is. I am going to go down the
line, give you each a crack at your favorite regulation. Mine
is WOTUS because I think everybody wants to take WOTUS out.
But while you all are thinking about that, I do want to
highlight that as one of the token Millennials in not just this
Committee but in Congress, as someone who grew up in
agriculture, it is very concerning the fact that we do not have
that next generation really primed and ready to go because it
is such a high barrier to entry. So I do want to highlight the
fact that I think there is opportunity for us to work on
streamlining some of these projects and programs.
And with that, I will start with you, Mr. Duvall, your
favorite regulation that you would like to see taken off the
books and why?
Mr. Duvall. The regulation around guestworker programs and
what we had to go through to get the labor that we need to get
our farms operated and stay sustainable.
Mrs. Cammack. Things like adverse wage effect, housing,
transportation, that whole gamut?
Mr. Duvall. And the list goes on and on and on.
Mrs. Cammack. It is almost like you are making the case for
a new guestworker program to be housed under USDA.
Mr. Duvall. You took the words right out of my mouth.
Mr. Friedmann. The hodgepodge of truck weight regulations
around the country. You cannot drive a truck across the United
States without stopping and getting new permits and revising
the number of axles on your truck as you move across.
Mrs. Cammack. Would you say 88,000 pounds would be the
truck weight that would be acceptable for interstate commerce?
Mr. Friedmann. Why don't we do what Canada does and has for
years and Oregon and Washington and many states, 105,500 with
an extra axle. The truck brakes faster and straighter under our
current law.
Mrs. Cammack. All right. Perfect, thank you.
Mr. Rosenbusch. Well, NEPA seems like the easy one, but I
am going to go with the Florida one and say phosphogypsum
reuse.
Mrs. Cammack. Okay.
Mr. Rosenbusch. And if you don't know what phosphogypsum
is, are that we have to stack it as the only country in the
world. Somebody else can ask that question next.
Mrs. Cammack. Excellent. Thank you.
Mr. Twining. I would say regulations around energy and the
use of renewable fuels and maintaining a kind of all-the-above-
energy policy.
Mrs. Cammack. Okay.
Mr. Brown. I would say the GIPSA rules and contracting. I
hear so much about consolidation. Our industry is--the top four
is 54 percent. The other protein industries are over 80
percent. If I took half of our industry, added 15 more
companies to that, we still wouldn't hit that margin. And I
hear about concentration, and I think about it. And maybe the
only way it will resonate with some people is this way. You
want a job in high tech, you go out to Silicon Valley. You want
to be a movie star, you go to Los Angeles. You want to get the
chicken business, you can do it in over 30 states in America,
so please join us.
Mrs. Cammack. Never heard that one before, but that is
smart. I like that.
Mr. Larew. Absolutely. Well, I will stay on this theme but
actually flip it around and say that the existing regulations
right now in the Packers and Stockyards Act are what needed to
change. They limit individual farmers' and growers' abilities
to challenge deceptive practices, to challenge retaliation, and
for competitive injury and harm within this consolidated
market, individuals have to prove harm to the entire industry.
Nobody who wants to seek remedy should have to go through that.
Therefore, we need to change that.
Mrs. Cammack. Suffice it to say that the regulatory regime
is killing agriculture as a whole and it needs to change
dramatically, correct? Let the record reflect that every single
one of the witnesses is shaking their head yes. I yield back.
The Chairman. All right. I thank the gentlelady. We were
going to keep going here, but we will--because of the interests
of Members, which I really appreciate, the folks come back and
we will recess at some point. We just have two votes, but we
are not going to recess yet. We will keep going. And I am
pleased to recognize my friend and the gentleman from
California, Mr. Carbajal, for 4 minutes.
Mr. Carbajal. Thank you, Mr. Chairman. My staff challenged
me to walk up the stairs, this old Marine, to remind me that
those were a long time ago when I served in the Marine Corps.
Since 2019, my colleagues and I have worked in a bipartisan
manner to address the workforce challenges that producers
throughout the nation are facing through passing the Farm
Workforce Modernization Act in the House twice (H.R. 5038,
116th Congress, H.R. 1603, 117th Congress), the Senate
introduced a companion bill that would have provided much
relief, specifically to H-2A users dealing with adverse effect
wage rate, AEWR, increases. This may have been the closest we
have ever come in a long time to seeing ag labor reform done in
decades.
Last night, the Department of Labor put out a final rule
for AEWR. There is much discussion today about regulations that
are causing harm to farmers, who are already dealing with the
higher input costs, supply chain disruptions, and other issues
on the topic of inflation.
Mr. Duvall, not to pick on you. But my question to you is
why did the American Farm Bureau Federation not support the
bipartisan effort to pass the Farm Workforce Modernization Act
at the end of last year, which would have superseded the
provisions of the recent AEWR rule and provided farmers with
much relief on the labor front through a modernization H-2A
program? I know many of the Farm Bureaus the largest ag
producing state in the nation, California, supported it. The
U.S. Chamber of Commerce supported it. The farmworkers UFW
support it. So I was, to be quite honest with you, just quite
baffled why we couldn't get over the line with the U.S. Farm
Bureau supporting it as well.
Mr. Duvall. So we have a serious problem with AEWR and the
formula that they use to set that even though we were in favor
of them freezing it. That was a good intention to freeze it for
1 or 2 or 3 years or whatever it was. We don't think that was
enough. We think that the AEWR needs to be reformulated and
make it fair to the worker and make it fair to the employer.
And no one size fits all. All of the country is different, and
it should be handled differently.
The second thing is private right of action. That bill put
farmers at more risk and more regulation than it was before.
The third thing is it allowed for year-round workers, but
it had a cap of I think it was 20,000 on it. There are 100,000
jobs needed in just dairy alone today. So we didn't have a
problem with having year-round workers, but we did have a
problem with the cap being there. And then we need to be
assured that we have a guestworker program in place and have it
successful and run multiple years before we are asked to do E-
verify. And E-verify, as most people know, there are a lot of
undocumented workers that work in agriculture. Those
undocumented workers have probably been in a lot of these
communities for 10 or 15 or 20 years. There needs to be some
way to allow them to stay and continue to work in agriculture.
Mr. Carbajal. Thank you. I would just say that I do believe
in Santa Claus and I, too, want perfect legislation out of
Washington, but sometimes that is the enemy of good, and I
think that was a good bill, and it was an unfortunate loss of
an opportunity.
Mr. Larew, you noted that President Biden's Executive Order
and USDA actions have minimized supply chain disruptions by
increasing capacity at ports. Can you expand upon how these
legislative initiatives have benefited shippers of U.S.-grown
agriculture commodities?
Mr. Larew. I had stepped out for just a quick minute there.
If you could, please, I realize that we are almost out of time
here, but I am happy to follow up unless you want to restate
the question. I am sorry.
Mr. Carbajal. Feel free to just send in your answer.
Mr. Larew. Absolutely.
Mr. Carbajal. Mr. Chairman, with that, I yield back.
The Chairman. I appreciate the gentleman. My good friend
from California, we work closely together, I tried to play the
role of Santa Claus and offer an amendment that was supported
by the Farm Bureau that would have made some simple--and I
supported that bill knowing that it needs to be fixed for it
ever to be able to go forward and offered an amendment.
Unfortunately, it was done under a closed rule in the 117th
Congress out of the House. And so I think we have some
components that we can all work together because without
workforce in agriculture, we are going to have food insecurity.
Now, I am pleased to recognize the gentlelady from Texas,
Congresswoman De La Cruz, for 4 minutes.
Ms. De La Cruz. Thank you, Mr. Chairman, for hosting this
important hearing today. Farmers today are facing more
uncertainty than ever before. Production costs are on the rise,
and there are supply chain issues. Labor costs are up, and on
top of all of this, we have experienced record inflation. Look,
it is clear that we need to get things back on track. In a
December Ag Economy Barometer published by Purdue surveyed
producers and listed high input costs and rising interest rates
as top concerns for farmers.
Presidents Duvall and Larew, can you speak to how these
issues are affecting your members?
Mr. Duvall. Yes, a rising interest rate is making it very
difficult for our farmers to borrow the capital to either
improve their farms or buy new machinery, update their
machinery or even get enough capital to put a crop in the
ground. When interest rates goes up, it is crushing to farmers
and ranchers. And as inflation hits when it affects fertilizers
and fuels, that cost of production, that is the biggest cost
that we have outside of labor. And it depends on what you are
growing as well. Fuel, the labor is the biggest cost that you
have. As inflation moves forward, all that puts our farmers in
a bind, too.
And I will defer to Rob.
Mr. Larew. Yes, no, I would echo much of what was already
said, and just say that that effect and the impact, of course,
is strongest on some of the smallest- to medium-size farmers
and producers out there. And there are families that are really
struggling with the very thin margins. But it is also--we have
made reference to the young farmers and beginning farmers and
so forth, and so any additional cost and impact has really a
damaging effect. That cost and inflation also impacts
everything, a lot of the programs at USDA in effectively
diluting the impact, whether it is a cost-share program or
something like that that has impacts and raising the cost of
everything and creating a bigger gap between what a farmer has
to contribute to for those increased costs.
Ms. De La Cruz. So are you finding that your farmers are
actually sowing less so that means perhaps in the future there
won't be as much that they are yielding as far as crops are
concerned?
Mr. Larew. Oh, I would always say that farmers and ranchers
are some of the most innovative and creative folks out there,
right? And so if they can produce and I think manage to produce
even more, but when you have these higher costs, I think it
does have the kind of dampening effect of keeping that
innovation at the same rate.
Ms. De La Cruz. Excellent. Thank you. Now, not long ago,
America was the largest energy producer in the world. Oil and
gas--I am from Texas, so those are two important resources
there--the raw materials for diesel fuel were abundant and
affordable. However, through the Biden Administration, they
have paused significant domestic production of oil, while
limiting and disincentivizing investments in American energy,
infrastructure, and refining capacity.
President Duvall, how has the Biden Administration's energy
policies affected agricultural producers' access to reliable
and affordable supply of diesel fuel?
Mr. Duvall. Yes, it has tremendously affected it, and just
like we were talking about, it really goes right down to the
bottom line of our farmers when they had to pay more for it.
When we were energy-independent--and I am proud to say that
agriculture played a major role and played their part in
ethanol and biodiesel production off our farms. Our country was
stronger, our farmers were stronger, and we had a better chance
to be sustainable.
Ms. De La Cruz. Thank you. I yield back.
The Chairman. I thank the gentlelady. Votes were called
about 6 minutes ago, and so we are going to hear from one more
Member, and then we are going to recess for anyone--I encourage
folks to come back. But we are going to hear from one more
Member, so I am pleased to recognize the gentlelady from
Washington, Congresswoman Gluesenkamp Perez.
Ms. Perez. Thank you, Mr. Chairman. And thank you to all of
our witnesses for being here today.
President Larew, as you may know, I am a big advocate of
right-to-repair legislation, and that is not just because I fix
cars for a living. I know that this is not just about cars and
tractors. It is actually about our DNA as Americans. We believe
in fixing things. DIY is part of our DNA. And so I was very
pleased to see your testimony, the National Farmers Union
supporting right to repair. I would just like you to elaborate
and explain in the real-world terms how this trend of us not
owning the things we rely on, not having the right to fix our
own stuff is affecting farmers and our food security.
Mr. Larew. Yes, I appreciate you raising that. And quite
frankly, I appreciate your leadership on this issue. And, as
you well know, as an auto mechanic yourself and farmers like
that independence. They like to innovate. They like to be able
to repair their own equipment. And so as manufacturers have
increased the capabilities of the machinery that comes with a
lot of complexity in equipment, so forth, but along with that
has come really big restrictions on farmers' ability to either
fix it, seek independent repairs, or to access even the
diagnostic equipment in some cases. And what we have come up
with is a patchwork, unfortunately, of approaches and MOUs and
promises in the past that have never actually led to any
concrete resolution to this issue so that farmers can handle
their own equipment.
The real-world impact that this has is delays and theme of
this hearing is added cost. This is about creating additional
burdens and ultimately affecting the bottom line for farmers
out there all across the country, either through delays, either
through because of that control of the repair and the parts,
added cost that is built into really also in a monopolized
equipment manufacturers' world.
We hope that there will be a solution out there. We know
that the states are addressing this issue. And we have seen
parallels with the auto industry where promises by the industry
have not led to the solution, but efforts to put that right to
repair into law has that added effect of making that accessible
to everyone.
Ms. Perez. Yes. Would you say that these policies are
increasing cost to the consumer for our----
Mr. Larew. Of course. Any time that there is added costs
raised into this, that has to be passed along somewhere.
Ms. Perez. And what about the impacts on labor and in the
growth of independent kids thinking about entering the trades
or the accessibility of owning tools to open up your engine?
Mr. Larew. Well, I think that there are two issues there.
One of these is this question around independent repair, right,
in the fact that one of the other themes from this is the
impact that added costs and restrictions on farmers and
ranchers is that that has a ripple effect through our rural
communities. And part of that effect is that small businesses
that may be able to offer repair or to provide some services
are currently limited in their ability to do that.
Ms. Perez. Thank you so much. Another issue that is
critical to my state is that of trade. Washington State's
agricultural economy is highly dependent on trade. We are one
of the largest exporting states. According to the USDA,
Washington ships $4 billion in domestic ag abroad annually. So
fruit tree growers in Washington State have lost more than $800
million exports to India and China because of these countries'
retaliatory tariffs. And that puts our growers at a
disadvantage when competing against growers that enjoy
preferential treatment.
With that, I will yield back my time. Thank you, Mr.
Chairman.
The Chairman. I thank the gentlelady.
The Committee will stand in recess subject to the call the
chair, which will hopefully be within 15 to 20 minutes.
[Recess.]
The Chairman. Well, I appreciate everybody's patience as we
do continue here. And I am pleased to recognize the gentleman,
a neighbor of mine actually, from New York, Congressman
Langworthy for 4 minutes.
Mr. Langworthy. Well, thank you very much, Mr. Chairman.
And as many of my colleagues have already mentioned, one of the
key drivers of skyrocketing prices facing our farmers and our
ranchers, including a lot of the small family farmers in my
district in western New York and the southern tier of New York
along the Pennsylvania line, is energy. And my district sits on
top of the Marcellus Shale, and it is considered one of our
nation's largest natural gas resources. Yet, Democratic leaders
in New York State and here in Washington have made it their
mission to forever lock away this game-changing source of
American energy. As a result of these policies, producers are
struggling to survive, struggling to afford the fuel they need
to run their trucks and their equipment. The energy crisis
facing our farmers is leading towards a food crisis. And if we
want to get serious about ensuring the future of American food
security, we need to get serious about unleashing the power of
American energy.
And with that, President Duvall, as you know, this
Administration has struggled with implementing an effective
energy strategy. And I agree with others on the panel that
Congress and the Biden Administration should avoid any policy
that seeks to halt or hold back increased domestic energy
production. And regarding inflation, energy costs couldn't be
any higher. For example, the average price of diesel per gallon
in 2020 was $2.58 a gallon, and since that, it has increased to
around $5 a gallon.
President Duvall, how are your members adapting to and
managing high energy costs in their agricultural operations?
Mr. Duvall. Well, we previously referenced it a little bit.
I think a lot of our farmers and ranchers are putting a pencil
to the crop that they are planning on planting, and it could
change what crop they plant or it could even make their mind up
not to plant it at all if the cost of production is going to be
more than what they are going to reap out of it. So I think it
is just one of the things that is in a formula that they go
through to decide what and whether they are going to plant it.
Mr. Langworthy. Great. And, Mr. Twining, in your testimony,
you mentioned a study that your association conducted regarding
potential scenarios of transitioning to electric light duty
vehicles through 2050. I come from a state that is looking to
enforce a transition to all electric vehicles and move away
from natural gas and other affordable fossil fuels by 2050.
Speaking with farmers back home last week, as we were on
district work period, this is something that weighs very
heavily on all of our producers. They have great uncertainty on
how they are going to comply with these goals that have been
arbitrarily set by our state government that may not be
achievable at all, while at the same time, we have an
Administration that is crippling our energy sector with
policies here in Washington. So what are some of the challenges
from moving an agricultural operation to all electric by 2050
and moving away from natural gas and fossil fuels as a whole?
Is this a timeline that you see as even remotely possible?
Mr. Twining. Well, I definitely encourage you to refer back
to the written testimony for the details, but I can tell you
practically on a daily basis the type of equipment that most
farmers and ag retailers like ourselves operate cannot be
successfully operated currently with existing electric
technology. And, more importantly, there is far better bridge
fuels and renewables that lower our carbon footprint and enable
us to continue to do business as normal with existing
equipment, which lowers our cost. So to leap to electric is
premature in my opinion and overlooks an important intermediate
step we could take that does bring climate benefits with it.
Mr. Langworthy. Thank you very much. And one separate
question for President Duvall on a different topic. I know that
you have been engaged on the right-to-repair issue, and just
quickly, I was wondering your memberships' thoughts on that.
Mr. Duvall. Yes, well, we would love to have a solution
within the industry, and that is why we work real hard with
John Deere, and we have a Memorandum of Understanding that
allows us to work on our equipment, take it to our local
dealer. They will give us access to the tools. But it is just a
Memorandum of Understanding. And hopefully, we are working real
hard to do that with other manufacturers. But if that doesn't
work, then we are going to be looking to you all to help us
solve that problem. And we will be revisiting it to be able to
monitor it and see whether it is working.
Mr. Langworthy. Thank you, Mr. Chairman. I yield back.
Thank you, witnesses.
The Chairman. I thank the gentleman. Now, I am pleased to
recognize the gentleman from Florida, Mr. Soto, for 4 minutes.
Mr. Soto. Thank you, Mr. Chairman. And thank you all for I
am sure what has been a long day on the Hill. But we have a lot
of work to do, gentlemen. This Committee is charged with an
incredible opportunity and responsibility. It is a farm bill
term. I know you all know this crystal clear. When I look at
what we are responsible for, I think about in central Florida
where I represent so many ranchers and citrus growers, farmers
of fruits and vegetables who are counting on us, and also many
folks, whether in our urban or rural areas, who are availing
themselves of SNAP as well and in some of our suburbs. And so
as we all work together, we have a responsibility to make sure
that we keep this critical coalition together.
Just speaking to some of my constituents at home briefly,
so many of our ranchers are going to need to continue to have
the vaccine bank to help out with livestock. Specialty crop
investments for citrus greening are going to be important,
preserving seasonality for our fruits and vegetables, growers
who are providing so many nutritious fruits and vegetables
during the wintertime, and then so many areas around the
district, whether it is rural, whether it is urban, and even
some of our suburban areas that desperately need to make sure
to have SNAP so no child in central Florida goes hungry.
And boy, did we have a roller coaster during the 115th
Congress. We had a great bill pass out of the Committee, and
then it failed once or twice on the floor. And then it took us
until the end of the 115th to finally get it done. And, of
course, we worked with our Senators as well and finally got a
product that we got through, thank goodness, and thanks to a
lot of work by everybody in the 115th Congress.
President Duvall, how key is this partnership between our
farmers, ranchers, and growers, along with SNAP and other food
assistance, to ensuring we pass a farm bill? How key is this
partnership?
Mr. Duvall. Well, of course, you brave men and women that
serve us in these capacities have to answer to your
constituents, and a lot of the people that serve in your
positions don't come from agricultural areas, so they don't
have an understanding, don't have a need to understand, and it
is important that we understand how important the safety net is
for agriculture so that we will have the food to be able to use
in the safety net for the people that are not as fortunate as
others during that period of their lives.
So I think they go together well. It gives us a true
picture of the food, where it is produced and where a lot of it
is consumed, and making sure that those people have access to
good quality food.
Mr. Soto. And I am glad you mentioned that, President
Duvall. Not only is it a coalition that pass the farm bill, but
so many of Florida's farmers, ranchers, and growers are helping
supply the food for the SNAP program. How important is it that
we continue that partnership to put our local agriculture to
work for the SNAP program? And how important is it for outreach
for Members of this Committee to make sure our whole coalition
understands this partnership?
Mr. Duvall. Well, it is important to all agriculture, but
it is really important to the small-, medium-sized farmers
looking for a local market. They may supply the local school
with those fruits and vegetables or whatever it might be. And I
just think that--and that is the partnership everybody desires
to have. We live in an era where everybody wants to know the
farmer, and they want to know how they produce his food, and
what better way to do that and do it local. Of course, we can't
feed everybody in America and everybody around the world that
way, but it is a market that flourished during the COVID
pandemic.
Mr. Soto. Well, thank you so much and yield back.
The Chairman. I thank the gentleman. I now recognize the
gentlelady from Illinois, Congresswoman Miller, for 4 minutes.
Mrs. Miller of Illinois. Thank you. President Duvall, in
your testimony you mentioned that receipts for major row crops
such as corn and soybeans are expected to fall. How do you
think new trade agreements could improve the situation?
Mr. Duvall. Anytime the field in the arena of trade is
leveled and we have access to those markets, it helps our
farmers and ranchers tremendously. So we are all the time
working to encourage trade across the country and across the
world, and we just think there are some great opportunities out
there, especially in the Asia Pacific areas and hoping that we
will get around to doing that because we feel like this
Administration just hasn't moved fast enough in that area.
Mrs. Miller of Illinois. I was going to ask you if you
thought that this Administration was passive or aggressive, so
thank you for sharing that.
And Mr. Rosenbusch, in your testimony, you note that
natural gas accounts for between 70 to 90 percent of ammonia
production costs and that natural gas prices doubled in 2022.
You also note that we need energy policies that support an
abundant, safe, and affordable supply of natural gas. Do you
think the Biden Administration has taken necessary steps in
supporting domestic production of natural gas?
Mr. Rosenbusch. So we obviously support anything that will
allow for natural gas capacity to increase. And I think that
you can turn to my colleagues at the energy association such as
API, et cetera, to give you a roadmap of what exactly those
energy producers do. But fossil fuels are a critical part of
food and agriculture, and so we do need to be more aggressive
at allowing our gas producers to expand production.
Mrs. Miller of Illinois. Would you share some policies that
you would like to see prioritized by Congress in order to
promote natural gas production?
Mr. Rosenbusch. Well, like I said, I would probably turn to
my colleagues that are representing the natural gas producers.
They are going to be the experts on that. But I could generally
just say that some of the similar things we have talked about
today around permitting, expansion of opportunities to expand
natural gas production, but I think it is also signaling. And,
we were talking about electric vehicles and phasing out of
gasoline vehicles, and I think those kinds of messages also
sound strong, and we need to just make sure we have strong
energy policies for agriculture.
Mrs. Miller of Illinois. I agree absolutely. My husband and
I are producers, and we are very concerned about this.
Under the Biden Administration, we have seen record
inflation, rising input costs, and a decrease in American
energy production. My fellow farmers are concerned that the
Biden supply chain crisis, inflation crisis, and energy crisis
threaten the very existence of the family farm. Farm income is
decreasing while consumer prices hit record highs. China is
taking advantage of us, and we must unleash American energy,
including biofuels, to fight back. I appreciate our witnesses
coming today to advocate on behalf of production agriculture.
Thank you so much.
Thank you, Mr. Chairman, and I yield back.
The Chairman. I thank the gentlelady and now recognize the
gentleman from New York, Mr. Molinaro, for 4 minutes.
Mr. Molinaro. Thank you, Mr. Chairman. I appreciate it. I
thank all of you for spending the day with us. It speaks
obviously not only to the important work of the Committee, but
obviously how important we feel agriculture remains not only to
food security, but national security. So we appreciate you
being here.
I want to localize one of my questions, and then I just
have one other, Mr. Chairman. So I represent a part of the
State of New York where family farms remain the largest
industry, but also where we continue to feel the pressure of
out-migration from metropolitan areas, putting a lot of
pressure for subdivisions and higher cost of land. I also, of
course, serve and represent New York State, which I think
California might give us a run for our money, but still perhaps
is among the most over-regulated states in America.
Most recently, as you likely know, New York began its
transition to a 40 hour overtime threshold for agricultural
workers, despite pleas from area farms and farmers across New
York already struggling under inflation, high cost of doing
business. I know this is a state issue but obviously has major
impact on farming and agriculture. So Members across the New
York State delegation have put forward legislation to try to
claw back that imposition of that overtime threshold, and we
are hopeful we can take some corrective action.
Mr. Duvall, I just--although I did want to call you Zippy
just because it felt good and it is fair enough. Mr. Duvall,
could you just speak maybe broadly, but if you would like to
speak specifically to the New York experiment about access to
the workforce, what lowering the threshold will do to family
farms and potentially hurt farms in New York State and maybe to
the benefit of other states if you have an observation in that
regard?
Mr. Duvall. Sure. Well, when you start talking about
overtime with farmworkers, it is a different conversation than
it would in most production of anything else because we are
driven by the weather and elements outside, and 1 week we may
be full speed ahead doing the work, we may be in harvest, we
have to get a harvester planted and you got to go long hours to
get it done. And then the next week, it may be raining and you
might not be doing anything. And overtime just really doesn't
fit in the scheme we do things. And, two, a farmer is a
businessman, and if you force him to pay overtime, a lot of
farmers probably would say, okay, you made your 40 hours, I am
going to hire somebody else to come in and work the other part
of the overtime. So a lot of the workers don't like that. They
want to work. They don't mind working overtime----
Mr. Molinaro. So emphasize that for me one more time. So
the State of New York imposes the overtime standard. Workers
don't like it. In fact, I have talked to many farmworkers who
say, listen, I came here to make money, not go on vacation.
What does that mean for New York farms?
Mr. Duvall. Yes, it means that they are--there is already a
shortage of help, so finding somebody else that would work in
another 40 hour slot would be difficult. But when crops need to
be harvested, they have to be harvested. We can't wait or they
will spoil in the field. And so much of what we do is on a
timely basis and has to be done. So it would put farmers under
a hardship, and it would put their employees under a hardship.
Mr. Molinaro. So as much as I would like to speak, Mr.
Chairman, about the high cost of land in states like New York,
we will revisit that, but a broader consideration for land
trusts in the context of purchase or transfer development
rights as a means of protecting family farms in a state like
New York, we have to patch together small farms in order to
make large farming work, and using tools more creatively is of
benefit to us. I won't belabor that.
Mr. Brown, I would just like you to know that the 19th
Congressional District in the State of New York is the
birthplace of the chicken nugget, which I am told is still
chicken.
Mr. Brown. Well, sir, as somebody from Sing Sing, New York,
the town, not the prison, and having gone to school upstate in
Rochester, I am well acquainted with New York, and I am a New
York Giants fan.
Mr. Molinaro. As am I. Mr. Chairman, with that, I yield
back.
Mr. Rouzer [presiding.] Mr. Moore is recognized for 5
minutes--or 4 minutes. Pardon me.
Mr. Moore. Thank you, Mr. Chairman. And I am not a New York
Giants fan, but other than that, I am an SEC football fan.
So first, let me say thanks to the witnesses for all being
here. Guys, we got committee hearings going, so we are all over
the place. Zippy, good to see you.
First question, Zippy, you mentioned something earlier
today, and I was trying to track on Scope 1, Scope 2, and Scope
3. Somebody was talking about that, and it is just frustrating
to me and this Committee. I am reminded of what Ronald Reagan
said. He said the government's idea on the economy is when it
is moving, you tax it; if it keeps moving, you regulate it; and
when it fails, you subsidize it. So today, it seems like a lot
of regulations have been the issues that we are addressing. So
as we talk about consolidation, I think a lot of times
government, we have our thumb on the scale and we cause a lot
of problems. But can you elaborate a little more on this
consolidation because of maybe the ESG, the things that are
being pushed on farmers now that is fairly new to some of us
here?
Mr. Duvall. So the pressures on the farmers is every time
when you put those regulations and start enforcing them, our
farmers have to spend money and time or hire lawyers or have to
hire consultants to help them get it done. And the margin that
we work on is so thin, we can't afford to do that if we even
had the time to do it. None of us have the--most of us don't
have the expertise to get it done on our farms.
Mr. Moore. So the middle and smaller farmers, it really
challenges them. Every time the government says, ``Hey, you got
to respond to this regulation, you got to fill out this
paperwork,'' it puts you guys in tough spot.
Mr. Duvall. It puts them in a tough spot. Movement toward
demanding that we do certain things around climate puts farmers
in a position where they got to have different equipment to do
it with and different ways of doing that farming, and they
can't afford to do that, And it just puts them in a very
difficult--the American people love the farmer, but they are
associated with the small-, medium-sized farm. And of course,
98 percent of us are family-owned. They are not big, corporate
farms everywhere. But we are doing everything in our power
regulatorily to force that small-, medium-sized farm out of
business, and that is opposite what the American people want.
Mr. Moore. Zippy, my cousin just came back to our family
farm that we hadn't been farming, haven't been row cropping
since 1980. And he was getting started, and he told me his
input cost. He budgeted for I think he said $3.30 a gallon for
diesel fuel for this production season. And obviously, energy
policies domestically, they just blew his budget up between
that and fertilizer cost. And so it is something, like I said,
I think a lot of times our policies here cause bigger problems.
And real quick, Mr. Brown, I am a poultry science guy from
Auburn from back in the day, and I think we used to hit about
90 birds a minute, and I think that was kind of the target. And
so tell me now, the USDA and how they are--you told me other
countries are beating us basically in production of birds per
minute now and line speeds. And so tell me, what are we facing
and what is the holdup on getting the job done?
Mr. Brown. Yes, sir. The line speeds typically for the
chicken industry historically has been 140 birds per minute.
Back in the 1990s when President Clinton was in office, USDA
came up with a program called HIMP. It was going to be a trial
program to see if companies that qualified could operate at 175
birds per minute. So that has been ongoing now since about
1998.
Then we had some groups come and sue USDA and the industry
about having this line speed program. We went to court. We
actually joined USDA. USDA was supposed to come out of there
and do a study on whether this was safe or not. As I mentioned
earlier, having been in place for well over 20 years now,
almost 25 years, we have all the statistics that the food
safety profile is equivalent to equal at the higher end and
also that the worker safety profile is equivalent. What is
going on is we have the 175 waiver. We could lose it to go back
to 140 when other nations, Canada, Germany, et cetera, are at
220.
Mr. Moore. Thank you, Mr. Brown. I will yield back. Sorry,
Mr. Chairman.
Mr. Rouzer. No problem. The gentleman's time has expired.
I now recognize myself for 4 minutes. So Mr. Brown, if you
want to continue on there just a little bit, I will give you a
little leeway.
Mr. Brown. Sure. And I am sorry I missed the click, Mr.
Chairman, Mr. Rouzer.
With regards to the GIPSA rules that are in our testimony
that we are upset with is, basically, Congress never authorized
these GIPSA rules. I think, Mr. Rouzer, as you know. In fact,
in about 2010 during the first term of the Obama
Administration, a trial lawyer out of Mississippi who made a
living suing chicken companies was given a job as an
Administrator at USDA. He crafted those original proposals.
Congress forbade the Administration from going forward on those
rules. When it had a change of Administration, they were not
pursued by the Trump Administration nor Secretary Perdue. We
have now had another change of Administration, and they have
come back.
We hope that they never are enacted. We are going to work
with Congress, hopefully, to prevent them from being enacted.
And if there is one son of a gun after 13 years that is sitting
back just licking his lips waiting for these rules, it is the
guy that wrote them, the trial lawyer in Mississippi, Dudley
Butler. Let's deny him that joy.
Mr. Rouzer. Mr. Rosenbusch, several of us were in a T&I
markup earlier this morning, and we repealed through a CRA--it
got out of committee anyway--a repeal of the WOTUS rule, and
then also passed legislation that I had recently introduced,
H.R. 1152, the Water Quality Certification and Energy Project
Improvement Act of 2023, which addresses the weaponization of
the Clean Water Act, specifically section 401. How big a
problem--and you have touched on this a little bit before--but
how big a problem is permitting in this country? And if we get
our permitting right with clarity, transparency, easily
enforceable and conforming to the law, how much would that
improve our ability to source back in this country?
Mr. Rosenbusch. Yes, it would be a huge impact. And I will
start with WOTUS to your comment. I mean, farmers--and to build
off what Zippy has said, they have been committed to
conservation for a long time. And when you think about water
and nutrient use and using the 4R's of using fertilizer at the
right source, rate, time, and place, tremendous improvements.
As a matter of fact, 34.7 percent was one example of nutrient
use efficiency that a farmer in Illinois experienced after
using some of these practices.
So we really need to be practical with these regulations
both on the farm because we know farmers are doing the right
thing voluntarily, and then from a production standpoint, the
permitting is key to fertilizer companies being able to deploy
their capital and assets quickly and efficiently. And, they
have projects, they are ready to go. We have invested a lot in
the energy transition, and we are talking about how important
natural gas is, but low-carbon ammonia is going to be a hot
investment into the future. And these kind of innovations are
going to need streamlined permitting that will allow them to
meet those innovation goals.
Mr. Rouzer. Mr. Duvall, real quickly, you touched on trade
a little bit. Have there been any conversations with the
Administration about a trade deal with the UK that you have
been involved in?
Mr. Duvall. I have not. I did have conversations with the
UK last week. We talked about many things, but we also talked
about trade. Also, we have talked to the Administration a lot
about enforcing the rules of USMCA when it comes to corn going
to Mexico and dairy in Canada.
Mr. Rouzer. Thank you. My time has expired. I now recognize
Mr. Duarte for 4 minutes.
Mr. Duarte. Thank you, Mr. Chairman, I appreciate it.
I think abundance and affordability are inextricably
linked, and yet we have regulation after regulation, land use
limitation after land use limitation, energy constraints here
in the country that are entirely resolvable. So, Mr. Brown, you
listed in your testimony that every American eats about 100
pounds of chicken on average each year, so it is a real round
number. We can work from there. Let's start and just tell a
little bit of the other side of the story, at least one other
side of the story on corn ethanol, the price of feedstock for
chickens, biofuels in general, and what are some of the
biofuels policies doing to the price of chicken?
Mr. Brown. Well, sir, if you go back to when the ethanol
mandate was put in, I believe it was 2007 or 2008, that drove
the price of feed, the price of corn through the roof. It
knocked 13 poultry companies out of business. Oddly enough, you
have people that advocate for ethanol but they complain about
consolidation. But we will set that aside. So it drove the feed
cost up. Now, over that time, our industry has taken narrower
margins, and we have learned to live with it because, again, we
are not going to refight that war. I don't think Congress would
have the appetite for that. But it drives up costs. You drive
up costs, that is less money for others within the industry and
its cost, if you are a grower, potentially less money, you are
growing less birds. And if you are a consumer, you are paying
at the meat counter.
Mr. Duarte. Thank you. And on top of that, a chicken in
every pot used to be a political kind of a proverb that was
pitched upon by several politicians. We have a government that
knows all about line speeds of chicken processing. We have a
government that wants to pretend they know more than they do
about chicken contracting and how chicken producers get to
contract, make their own business decisions with companies you
represent. I will leave that alone, but I think it is self-
evident that those are not putting chickens in every pot.
Mr. Zippy Duvall, how are you doing?
Mr. Duvall. I am good.
Mr. Duarte. Long time since I have seen you in Tehama
County on my property where we had a little WOTUS runaround.
Mr. Duvall. That is right.
Mr. Duarte. I was out there with Paul Winger years and
years ago.
Mr. Duvall. Thank you for allowing me to do that.
Mr. Duarte. Back during the Obama era WOTUS rule, the Farm
Bureau did a really good job of mapping and predicting what
percent of American productive farmland would be impacted by
the WOTUS rule. Have you done that again for the Biden WOTUS
rule?
Mr. Duvall. We have done it in particular states. I can't
tell you which ones they are. But if it continues to move
forward, we are going to be doing more of that. We are really
focused on what the second ruling is going to say.
Mr. Duarte. Yes. And this WOTUS rule actually has led to
the criminal prosecution of farmers for farming their own land.
Mr. Duvall. Yes, sir.
Mr. Duarte. In production systems that have been farmed
there before.
Mr. Duvall. Yes, sir.
Mr. Duarte. And so the vagueness of the WOTUS rule is a
problem.
From The Fertilizer Institute, Mr. Rosenbusch, we heard a
few weeks ago in a State of the Union address that the
President conceded that we would need fossil fuels for the next
10 years. What is the fertilizer industry's plan to supplant
fossil fuels as feedstocks to meet the nation's agricultural
needs for nitrogen fertilizers after that 10 years is up? I am
sure you have a plan.
Mr. Rosenbusch. Well, great question, Congressman Duarte,
and I think we will continue to need fossil fuels to support
fertilizer supply. This is not a switch that you turn on and
off. However, I will say that billions of dollars are being
invested right now by manufacturers into low-carbon ammonia
production, so essentially, the ability to produce nitrogen
fertilizers without natural gas. And whether it is
electrolyzers or renewable fuels that will allow that chemical
process that we call Haber-Bosch to occur is something that is
going to be invested in into the future. But that is not going
to happen today and tomorrow, and a lot of that may end up
going into hydrogen fuel for a source of fuel as well. So we
will continue to need natural gas and strong energy policy for
fertilizer production.
Mr. Duarte. Thank you. I yield back to the Chairman.
The Chairman [presiding.] Well, thank you. I think that is
all of our Members. Well, we very much appreciated everybody's
patience and your endurance. And, it's quite frankly, rural
America, the agriculture industry, and meeting the needs of
every American family is well worth our endurance.
So today's hearing, just very pleased. We had 52 Members
that participated in today's hearing. I don't know if that is a
record, but I think it probably is for the Agriculture
Committee because we have had so much interest. We have had to
expand our Committee membership here, which I think speaks to
the importance of this industry, to the American families, and
quite frankly, to a lot of families around the world when you
think about our exports and our humanitarian aid that we
provide through food.
Today's hearing has really shined a spotlight on many
issues confronting producers and the entire agriculture sector
from the farm to the consumer, whether it is market volatility,
weather risks, or a wrongheaded government policy, much of
which have been exacerbated by the Biden Administration. The
House Committee on Agriculture has a responsibility to examine
these challenges and develop responsible approaches to
addressing them in the upcoming farm bill.
Over the course of the next several months, the Committee
will be holding numerous hearings, and we will be continuing
our farm bill listening sessions at various locations across
the country. I would like to challenge my fellow Committee
Members to be present and heavily engaged in this process.
Getting the farm bill done right and on time will require a lot
of work and attention from all of us, but we owe it to all our
constituents from producers to processors and, ultimately, to
consumers to get that policy right.
So I want to thank the witnesses here today for their
excellent testimony and responses to the Members' questions. I
do look forward to future hearings and as well as the next two
listening sessions, one in Fort Worth on Thursday and one in a
couple of weeks in Waco, Texas, and then with a lot more to be
scheduled after that.
And so under the Rules of the Committee, the record of
today's hearing will remain open for 10 calendar days to
receive additional material and supplementary written responses
from the witnesses to any question posed by a Member. This
hearing of the Committee on Agriculture is adjourned.
[Whereupon, at 2:45 p.m., the Committee was adjourned.]
[Material submitted for inclusion in the record follows:]
Submitted Statements by Hon. Glenn Thompson, a Representative in
Congress from Pennsylvania
Statement 1
on behalf of bill broydrick, executive director, national rural lenders
roundtable
Thank you for the opportunity to submit testimony for the February
28th House Agriculture Committee Hearing on Uncertainty, Inflation,
Regulations: Challenges for American Agriculture.
The Committee, in preparation for the farm bill, is considering the
current regulatory system at USDA. USDA operates several programs that
utilize guaranteed lending to promote prosperity in Rural America.
The National Rural Lenders Roundtable is a Trade Association of
stakeholders in the rural lending sphere (See www.NRLRL.com). The goal
of everyone concerned is to deploy capital to economically viable
projects in Rural America. Our motto is that it is better to lend than
to spend.
USDA has undertaken a complex regulatory regime which constantly
and needlessly delays deployment of capital to Rural America, unlike
the Small Business Administration which operates similar programs. SBA
has determined that its guaranteed lending programs are granted a
Categorical Exclusion from the National Environment Protection Act
(NEPA) because these guaranteed loans are not a major Federal action.
On the other hand, USDA requires applicants through a series of time
consuming and expensive reports to prove that they are not a major
Federal action.
USDA loans can not be closed unless and until all of the
environmental requirements are met. The result are delays that hurt the
borrower and rob the community of needed capital. For example, several
hotel projects in California continue to be delayed because USDA has
not reviewed environmental reports.
We urge the Committee to consider adopting a presumptive
categorical exclusion that can be overridden by the [Under Secretary]
for Rural Development if she believes that a project is a major Federal
action as part of the farm bill.
We look forward to working with the Committee.
Statement 2
on behalf of j.r. simplot company
Overview
The food supply chain, in particular key inputs to agriculture
(such as nutrients), have shifted recently due to increased energy
prices, the conflict in Ukraine and other interruptions in global
trade. The result has been increases in prices throughout the entire
food supply chain: costs for production of nutrients and growing food
have increased and have contributed to record food prices. In the U.S.,
food prices have reached highs not seen in decades, while globally food
prices are 25 percent higher than pre-pandemic costs.\1\ * The CPI
(Consumer Price Index) for all food increased 0.7 percent from December
2022 to January 2023, and food prices were 10.1 percent higher than in
January 2022.\2\ The reasons for these cost and price increases are
complex. As to nutrients, prices are affected by a variety of factors
including global trade trends including unfair trade, energy prices,\3\
and supply and demand conditions.
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\1\ MacDonald, Alistair ``Globalized Supply Chain Brings More
Turbulent Food Prices'' Wall Street Journal November 28, 2022,
https://www.wsj.com/articles/globalized-supply-chain-brings-more-
turbulent-food-prices-11669557602.
* Editor's note: footnotes annotated with are retained in
Committee file.
\2\ ``Summary Findings Food Price Outlook, 2023'', Economic
Research Service U.S. Department of Agriculture, February 23, 2023
https://www.ers.usda.gov/data-products/food-price-outlook/summary-
findings/.
\3\ Energy prices affect agriculture and the production of
fertilizers in a multitude of ways. Natural gas is a major feedstock to
make ammonia; as the price for natural gas increases so does the cost
of making nitrogen fertilizers. For phosphate, sulfur is needed to make
phosphoric acid, which is the building block for phosphate fertilizers.
Sulfur is acquired from oil and natural gas production. Declines in
domestic production of these fuels results in tightening supply for
sulfur and increased prices.
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The J.R. Simplot Company (Simplot) has manufactured nutrients for
American agriculture for over 75 years, with a focus on making
phosphate fertilizers. Phosphate is a major component of nutrients
needed to grow food in America. Being able to supply the food needs of
the United States (i.e., food security) is a national and economic
security issue. The ability to produce domestic phosphate for
fertilizer needed to grow food in America is threatened by foreign
imports and by a very burdensome, time and cost consuming regulatory
process to obtain approvals for new mines. Fertilizers, including
phosphate products are essential to maximizing crop yields and an
essential input for farmers across America. As global supply chain
issues persist, it is even more vital we as a country are able to
access crop nutrition inputs like phosphate that are present in the
United States.
Over the past few years increasing domestic production of
fertilizer has been a bipartisan issue and should remain a bipartisan
objective at the top of minds for policymakers. Below are quotes from
House Agriculture Committee Leaders and U.S. Department of Agriculture
Secretary Tom Vilsack voicing support for increased domestic production
of crop nutrition products.
In a September 27, 2022 Press Release, then Chairman of the House
Agriculture Committee and now Ranking Member David Scott said:
``The importance of American-made fertilizer production has
never been clearer than it is now. The war in Ukraine and other
challenges to our agricultural supply chain have been a
hardship for our farmers and impacted access to critical
production tools that will carry over into the next harvest
season,'' \4\
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\4\ Chairman David Scott Applauds USDA's American-Made Fertilizer
Production Grants D House Agriculture Committee (https://democrats-
agriculture.house.gov/news/documentsingle.
aspx?DocumentID=2664).
Current House Agriculture Committee Chairman GT Thompson noted the
importance of domestic production of phosphates in a June 2022
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factsheet saying:
``Streamlining leasing and permitting processes to expedite
exploration, production, processing, reprocessing, recycling,
and domestic refining of potash and phosphate is a critically
important way to reduce our nation's vulnerability to supply
chain disruptions and lower input costs. The majority of the
phosphate reserves in the world are found overseas; in
particular, Morocco and the Western Sahara have over 70% of the
world's reserves. To maintain a viable phosphate fertilizer
industry in the United States requires reliable and predictive
processes to access phosphate ore. A significant portion of the
phosphate present in the United States is found on Federal
lands in the western U.S. Though getting Federal and state
approvals to mine such ore is increasingly unpredictable due to
permitting process delays and litigation. The NEPA
environmental studies, permitting processes, and subsequent
litigation often result in permitting expenses exceeding $10
million.'' \5\
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\5\ https://agriculture.house.gov/uploadedfiles/
overview_and_bill_summary_-the_reduce_farm_
input_costs_and_barriers_to_domestic_production_act.pdf.
Finally, in a March 11, 2022 press release, USDA Secretary Tom
Vilsack announced his support for increased domestic production of
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fertilizer which included:
``Recent supply chain disruptions from the global pandemic to
Putin's unprovoked war against Ukraine have shown just how
important it is to invest in this crucial link in the
agricultural supply chain here at home,'' said Agriculture
Secretary Tom Vilsack, ``The planned investment is one example
of many Biden-Harris Administration initiatives to bring
production and jobs back to the United States, promote
competition, and support American goods and services. As the
President said [at the State of the Union], we are working to
rebuild the economy towards resilience, security, and
sustainability, and this support to provide domestic,
sustainable and independent choices for fertilizer supplies is
part of that effort. In addition to the jobs, lower costs and
more reliable supply, increased investment in the domestic
fertilizer industry will help address climate change by
reducing the greenhouse gas emissions associated with
transportation, while also fostering more sustainable
production methods and more precise application.''
Fertilizer prices have more than doubled since last year due
to many factors including Putin's price hike, a limited supply
of the relevant minerals and high energy costs, high global
demand and agricultural commodity prices, reliance on
fertilizer imports, and lack of competition in the fertilizer
industry.
The United States is a major importer and dependent on
foreign fertilizer and is the second or third top importer for
each of the three major components of fertilizer. The top
producers of the major components of fertilizer include China,
Russia, Canada and Morocco, with Belarus also providing a
significant share of potash.\6\
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\6\ https://www.usda.gov/media/press-releases/2022/03/11/usda-
announces-plans-250-million-investment-support-innovative.
As a domestic producer of phosphate fertilizer, the J.R. Simplot
Company applauds the remarks and efforts of Congressmen Scott and
Thompson and Secretary Vilsack, and would encourage bipartisan support
to find solutions that make increased domestic production more
achievable and to ensure the reliable supply of crop nutrition products
to American farmers. Included in this submission are suggestions for
reforms that could positively impact domestic producers providing crop
nutrition products to American farmers who work every day to feed our
country and the world.
Background
Simplot has a more than 90 year history as a family-owned,
privately held global food and agriculture company headquartered in
Boise, Idaho. Its portfolio includes phosphate mining, fertilizer
manufacturing, food processing, farming, ranching and cattle
production, and other enterprises related to agriculture. The company
has large mining and manufacturing operations with three mines in Utah,
Idaho, and Nevada and four manufacturing facilities in Idaho, Wyoming,
and California distributing fertilizer products and material throughout
the U.S., Canada, and Mexico. Simplot owns 16 ranches in Idaho, Nevada,
Oregon, and Utah and 40 working farms across Idaho and Washington.
Simplot is one of the world's largest frozen potato processors, with
annual production of more than 3 billion pounds of french fries and
related products.
Simplot's ``mine to plate'' vertical integration strategy gives us
a unique understanding of the food supply chain, including specific
segments such as the fertilizer supply chain. Thus, in this testimony,
Simplot provides insight from an integrated producer's perspective into
food supply dynamics with an emphasis on the challenges of producing
phosphate nutrients for American agriculture.
Phosphate is a Critical Mineral Essential for Food Security
Phosphate is critical to the production of our nation's major
crops, such as wheat, corn, soybeans, and cotton. Phosphate is the base
mineral for phosphate fertilizer, an irreplaceable nutrient for these
crops. The importance of phosphate to national security has been
recognized for well over a century. President Taft, in a special
message to Congress on natural resources, stated the following: \7\
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\7\ Taft. 1910. Special Message to Congress. January 14.
``The extent of the value of phosphate is hardly realized,
and with the need that there will be for it as the years roll
on and the necessity for fertilizing the land shall become more
acute, this will be a product which will probably attract the
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greed of monopolists.''
President Taft's message on phosphate was prescient: he recognized
that having fertilizers to grow food was a national security issue and
also that foreign interests posed a threat to this security. President
Taft was concerned about the acquisition of phosphate by foreign
interests.\8\ In those days, the eastern U.S. phosphate deposits were
owned or controlled by European companies. Most, if not of all this ore
was being exported for the use of European farmers. It was widely
recognized that domestic sources of phosphate for domestic fertilizer
manufacture and use was vital to the development of this country, and
that we should not be dependent on European suppliers.
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\8\ USGS. A History of Phosphate Mining in Southeastern Idaho.
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Besides the eastern phosphate deposits, the other main source of
phosphates in the United States is the Western Phosphate Field. The
Western Phosphate Field covers over 350,000\2\ km in Idaho, Montana,
Utah and Wyoming and is one the largest resources of phosphate rock in
the world.\9\ The importance of this source of phosphates was
recognized by Presidents Roosevelt, Taft and Wilson. On December 9,
1908, the Secretary of the Interior issued a Secretarial Order that
created a ``temporary'' phosphate reserve of 18,400\2\ km in Idaho,
Utah and Wyoming. Three additional Secretarial withdrawal actions in
1908 and 1909 added approximately 18,600 km2 to the phosphate reserve.
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\9\ Hein. 2004. Life Cycle of the Phosphoria Formation. Elsevier
B.V. Amsterdam.
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In response to President Taft's 1910 Special Message, the Pickett
Act was passed on June 25, 1910. The Pickett Act provided the Secretary
of Interior the ability to withdraw certain Federal lands from
exploration and occupation. Under the Pickett Act, Presidents Taft and
Wilson withdrew approximately 10,500\2\ km in Idaho, Utah and Wyoming
(1910-1917) and formally created the Western Phosphate Reserve. The
Mineral Leasing Act of 1920 rendered moot the need for phosphate
withdrawals. Eventually, the Department of Interior created Known
Phosphate Leasing Areas (KPLAs) where the phosphate resource is
available only through the competitive leasing provisions of the
Mineral Leasing Act.
Western phosphate is a major source of phosphate used to grow crops
in the United States. Approximately 1.2 million tons of phosphate
fertilizer (as P2O5) is produced in the Western
Phosphate field. This can provide sufficient fertilizer to grow 24
million acres of corn.\10\ For context, in 2015 approximately 90
million acres of corn was grown in the United States.\11\ Fertilizers
are one reason that corn production has increased, while the number of
planted acres has decreased (see Figure 1). This ``value add'' by
fertilizers such as phosphate, is one reason why having strong domestic
sources of phosphate is important for the United States to produce its
own food supply.
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\10\ California Fertilizer Association. 1995. Western Fertilizer
Handbook, 8th edition. Approximately 100 lbs. of
P2O5 is needed per acre of corn.
\11\ Department of Agriculture. 2018. Economic Research Service.
https://www.ers.usda.gov/topics/crops/corn/background.aspx.
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Figure 1. U.S. Corn Acreage and Yield
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[https://www.ers.usda.gov/webdocs/charts/63406/
cornplantedacresand
yield.jpg?v=43054]
Source: USDA, World Agricultural Outlook Board, World
Agricultural Supply and Demand Estimates.
Updated: November 2017. [Online version updated June 2018.]
The Production of Domestic Phosphate Fertilizers is Threatened by
Government Policies and Unfair Trade
The phosphate supply in the United States is subject to disruption
due to the difficulty in obtaining approvals for mining of phosphate
ore, an ever increasing regulatory burden and unfair competition from
foreign sources.
Obtaining Approvals for Phosphate Mining is Growing in Difficulty
Avoiding disruption of supply and maintaining a viable phosphate
fertilizer industry in the United States requires a reliable and
predictive process to access phosphate ore. As described earlier in
these comments, a significant portion of the phosphate reserves present
in the United States are found in federally managed land in the western
U.S. Thus, phosphate reserves exist and can be developed in the right
economic and regulatory environment. However, substantial hurdles
discourage opening new mines and processing facilities.
As noted above, phosphate deposits in the Western United
States are often located on Federal lands. This requires
Federal permitting as required by the National Environmental
Policy Act (NEPA). States also have permitting requirements.
Obtaining permits has become very unpredictable due to
permitting process delays, changes in the policy preferences of
Administrations, and litigation. Often, the environmental
studies, permitting processes and subsequent litigation result
in permitting expenses exceeding tens of millions of dollars.
These costs are incurred without any certainty of being able to
successfully develop a mine.
A good example is Simplot's new Dairy Syncline Mine project
in Eastern Idaho, which took 12 years to secure approval from
the Federal Government. After submission of the proposed action
in 2008, the notice of intent for the Dairy Syncline mine
project was published in 2010 but Federal approval of the
project did not occur until 2020.\12\ Opening the mine would
grow Simplot's capacity and certainty to produce phosphate
fertilizer for decades.
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\12\ ``BLM and USFS Approve Dairy Syncline Mine Project,'' U.S.
Department of the Interior Bureau of Land Management (Apr. 7, 2020),
available at https://www.blm.gov/press-release/blm-and-usfs-approve-
dairy-syncline-mine-project.
Adding to the lengthy delays and inefficient process, there
are many problems with the process after the agency issues its
decision. Typically, before a plaintiff can challenge a final
agency decision in Federal court, it must exhaust all
administrative remedies. Courts are allowing too many loopholes
in this important procedural step which signals to the agency
and company that a legal challenge maybe facing the project.
This has a significant influence on development of the mine.
The current statute of limitations for administrative review
(generally 6 years) is far too long to promote lawful
development; and even though permitting decisions usually span
multiple Administrations, changes in Administrations and their
particular policy preferences is leading to major uncertainty
during litigation. Finally, if a project has commenced,
environmental plaintiffs should be required to post a bond
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during the pendency of the litigation.
Simplot is concerned that permitting delays will be
exacerbated by recent rule changes related to NEPA which
require Federal agencies to engage in lengthy environmental
assessments and consultations, including for potential issues
that are indirect, not within the control of the permitting
agency or remote in time or geography.\13\
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\13\ National Environmental Policy Act Implementing Regulations
Revisions, 87 Fed. Reg. 23453 (April 20, 2022).
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Regulatory Burdens are Increasing
In addition to the difficulties in getting approvals to access
phosphate ore, the Federal Government is proposing new regulations and
Federal land management policies that will undoubtedly complicate the
ability to develop and operate phosphate mining facilities.
Federal land management policies and rules dramatically affect the
availability of mineral resources for development. In the Western
Interior Great Basin, the conservation of the Greater Sage Grouse
[Centrocercus urophasianus] has been debated both by agencies and
Federal courts for over 2 decades. In the past decade the Federal
Government has produced three different management plans, with some
being at odds with individual state management plans. Too often though,
the Federal Government approach is to remove site-specific decision
making and replace it with large-scale land withdrawals and very
prescriptive land management requirements. On December 30, 2016, the
BLM issued a Notice of Amended Proposed Withdrawal, Draft Environmental
Impact Statement, with associated Notice of Public Meetings in Idaho,
Montana, Nevada, Oregon, Utah, and Wyoming in the Federal Register,\14\
proposing to withdraw approximately 10 million acres of Federal land
from mineral development.\15\ This includes millions of acres that were
identified as part of the Western Phosphate Reserve. Prescriptive
requirements that set disturbance boundaries and disturbance densities
further limit the ability to successfully develop mineral resources. A
more constructive approach to the conservation of species of concerns
is to work with state agencies and other stakeholders (like mining
companies) to develop mitigation and management methods that allow
multiple use to occur while enhancing habitat for such species.
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\14\ Sagebrush Focal Areas Withdrawal Environmental Impact
Statement Idaho, Montana, Nevada, Oregon, Utah and Wyoming (Draft
EIS) 81 Fed. Reg. (December 30, 2016), page 96478.
\15\ Such large withdrawals are not supported by the scientific
record; mining affects less than 0.1 percent of greater sage grouse
across its occupied range. Federal Register, Vol. 80, (October 2,
2015), page 59915.
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Voluntary mitigation discussions need to consider a wide variety of
opportunities including preservation (such as establishing conservation
easements on private land), the establishment of mitigation banks,
public-private partnerships, conservation plans, habitat restoration,
noxious weed control, fence marking/removal, riparian restoration
projects, prescribed fire (where appropriate), fuel breaks, green
strips and payment in lieu.\16\
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\16\ In Utah, Simplot has an active partnership with the Utah
Division of Wildlife Resources focused on restoring and improving
habitats used by big game and sage grouse. Projects completed at our
Vernal Utah mine include removal of approximately 400 acres of pinyon/
juniper to help establish sagebrush and understory as well as re-
seeding and planting of sagebrush to enhance sage grouse habitat.
[2018. Simplot Comments on the Utah Draft Resource Management Plan
Amendment and Environmental Impact Statement for Greater Sage-Grouse
Conservation. July 25.]
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Recent EPA regulations or proposed regulations add further
regulatory hurdles. The recent finalization by the Environmental
Protection Agency (EPA) of the Waters of the United States (2023 WOTUS
rule).\17\ This new regulation provides EPA (and implementing agencies)
jurisdiction over ditches, non-navigable waters, ephemeral and other
isolated waters that are currently not regulated as WOTUS. Thus,
additional permitting is now required, along with other requirements
(monitoring, etc.). Also, there will be new uncertainty in Clean Water
Act (CWA) Section 404 Permits\18\ due to an expansion in jurisdiction
of these ``other waters'' including additional tributaries and wetlands
that EPA now argues is covered by Justice Kennedy's ``significant
nexus'' standard.\19\ Just as absurd as these new requirements is EPA
promulgating this new rule while the Supreme Court is considering a
case which has the potential to significantly limit EPA's authority
under the Clean Water Act.\20\
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\17\ 88 Federal Register 3004, (January 18, 2023), pages 3004-
3144.
\18\ Section 402 of the CWA establishes the national pollution
discharge elimination system which is a national permit program that
may be administered by EPA, states, or Indian Tribes. Section 404 of
the CWA regulates permits for discharge of dredge or fill into
navigable water, which is defined by the waters of the United States
definition and is administered jointly by the Army Corp of Engineers
and EPA.
\19\ 547 U.S. 715, Rapanos Et ux., et al. v. United States, June
19, 2006.
\20\ Sackett v. EPA, 8 F.4th 1075 (9th Cir. 2021), cert. granted
January 24, 2022.
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Finally, at the end of 2022, EPA proposed a Clean Water Act
regulation that establishes a new designated use for WOTUS Tribal
reserved rights.\21\ The proposal usurps the authority of states (the
delegated authority) over establishing its own designated uses for
water and the appropriate water quality standards. The proposed rule
potentially dictates that states must set water quality criteria based
on pre-industrial conditions (or at least based on conditions in the
19th Century). The proposal stipulates water quality should be set at
levels to protect ``Tribal reserved rights unsuppressed by water
quality or available aquatic resources.'' The impact on current
activities regulated under the CWA as well as future activities would
likely be substantial. Such new water quality criteria will be
unattainable due to the inputs (such as extremely high fish consumption
rates) used to calculate the criteria. Also, the proposal can
potentially affect water rights.
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\21\ Federal Register. 2022. Vol 87 (232), December 5. p. 74361.
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Foreign Phosphate Threatens Domestic Production
Foreign production of phosphate fertilizers is increasing and
imports of such materials into the United States have increased
substantially. Historically, the largest sources of phosphate imported
into the United States are from Morocco and Russia (see Table 1). In
recent years, China has also been a major exporter of phosphate into
the United States. Overseas, major phosphate production projects
(especially in Saudi Arabia and Morocco) are being built, creating new
capacity that will drive additional foreign phosphate into the United
States. However, these foreign sources have engaged in unfair trade
practices and do not have to comply with the same level of
environmental standards as in the United States.
Table 1--MAP/DAP Imports (metric tons) to the U.S.
------------------------------------------------------------------------
Country 2017 2018 2019
------------------------------------------------------------------------
Morocco 1,177,500 1,518000 1,707,800
Russia 383,900 840,200 738,700
Saudi Arabia 32,800 167,900 224,700
Mexico 27,000 104,800 162,100
------------------------------------------------------------------------
Expansion of overseas operations also threatens the economic
viability of domestic phosphate producers. Saudi Arabia in the past
decade has invested billions of dollars into phosphate production. The
Al-Jalamid Phosphate fertilizer complex in Saudi Arabia is capable of
producing approximately three (3) million metric tons of diammonium
phosphate fertilizer (DAP) (approximately 1.5 million metric tons as
P2O5).\22\ A second mega phosphate fertilizer
being built at Waad al-Shamal will increase total Saudi Arabian
production to over six (6) million metric tons of DAP (3 million metric
tons of P2O5 annually).\23\ These projects will
make Saudi Arabia the third largest phosphate fertilizer manufacturer
in the world. Similar investments have been made in Morocco. Morocco's
phosphate and derivatives exports reached $11.31 billion in 2022. That
shows a 43.9% increase from the previous year.\24\
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\22\ International Fertilizer Association. 2004. Production and
International Trade Conference, Dubai, UAE. Note, this project produces
approximately 3 million metric tons of DAP; for conversion to
P2O5, it is assumed that 50% of the final product
is P2O5.
\23\ Reuters. 2016. Saudi Ma'aden seen ramping up phosphate output
from Waad al-Shamal in 2017. November 24.
\24\ Kasraoui, Safaa, ``Morocco's Phosphate Exports Hit Over $11
Billion in 2022'' Morocco World News, February 3, 2023. https://
www.moroccoworldnews.com/2023/02/353853/moroccos-phosphate-exports-hit-
over-11-billion-in-2022.
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It can be challenging to compete against foreign sources that do
not have the same environmental standards and do not incur related
compliance costs. For example, the Moroccan state-owned phosphate
fertilizer monopoly, OCP, S.A., has a practice of simply dumping
phosphogypsum waste from its factories into the coastal waters in
Morocco.\25\ These irresponsible practices starkly contrast with the
highly regulated management of phosphogypsum in the United states. The
environmental compliance costs for our facilities amount to millions of
dollars a year--costs our import competition do not face. Addressing
this regulatory arbitrage that benefits foreign producers would help
support U.S. manufacturing.
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\25\ CITE. Editor's note: this reference has been reproduced herein
as submitted.
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Challenges have also occurred from unfairly traded and subsidized
imports of phosphate fertilizers from Morocco's state-owned monopoly,
OCP, S.A. (``OCP''), and from Russian companies owned by oligarchs.
Fortunately, the U.S. Government implemented trade remedies to combat
these subsidized imports and make significant headway in restoring fair
market conditions. Furthermore, the Section 301 tariffs imposed by the
U.S. Government covered phosphate fertilizer from China, which had
started to surge into this country. Well before the recent price spikes
we have seen for fertilizers generally, these trade remedies brought
U.S. prices more into line with global prices, provided a market
opening for fairly traded imports from other sources, and helped U.S.
producers remain competitive.
It should also be noted that the single Moroccan producer, OCP,
immediately cut off its shipments of phosphate fertilizers to U.S.
farmers as soon as the Commerce Department and the ITC initiated their
investigations in July 2020, well before any tariffs were applied. This
shows that the Moroccan supplier is more than willing to squeeze
American farmers and disrupt their supplies when it suits foreign
interests. This is compelling evidence that phosphate is extremely
vulnerable to disruption and it is critical to support U.S. production
efforts.
Solutions for Increasing Domestic Phosphate Fertilizer Production
There are numerous steps that the Federal Government can take to
increase the production of domestic phosphate fertilizer. Such steps
require coordination in changes in policy direction and regulation
changes across the Federal Government including the Departments of
Interior, Agriculture, and Commerce and agencies such as the
Environmental Protection Agency.
Recognize the importance of phosphate. Add this mineral to
the Federal list of critical materials needed to ensure the
nation's food supply.
Adopt Efficient and Streamlined Permitting Practices to
Facilitate New Mines and Production. Meaningful reform for
permitting includes: (a) establishing a single lead agency for
all permitting requirements that incorporates (and utilizes)
state agencies and their programs; (b) issuance of a single
agency decision rather than multiple Federal agency decisions--
each of which are subject to litigation; (c) and set limits for
judicial review such as limiting legal challenges to being
filed within 60 days of the final agency decision, requiring
the plaintiffs to post a bond when the project has commenced,
and limiting the scope of appeals and litigation to issues
already raised within the NEPA process.
Reform NEPA requirements to a reliable and predictive
process. It is necessary to strengthen and reaffirm the
original procedural intent of NEPA. This has been lost within
the implementation of NEPA. It is no longer the planning tool
it was designed to be, nor does it inform or facilitate
meaningful input from the public. Instead, it has become the
tool used by organizations who oppose domestic mineral
extraction in general, as well as multiple use on Federal
lands, to prevent responsible and lawful mineral development.
Cease Large-Scale Withdrawal of Federal Lands for Mineral
Access. Too often Federal land management is singularly focused
on a specific natural resource issue (such as conservation of a
single species or ecological attribute). Instead, Federal
agencies need to take a more holistic and comprehensive
approach that preserves the concept of multiple use, which is
the foundation of Federal land management statutes. Instead of
extremely prescriptive mandates, Federal agencies should
instead truly collaborate with local communities, state natural
resource agencies and other stakeholders (such as mining
companies) to develop durable and effective species and
ecological conservation measures.
Change the Approach Used by EPA to Environmental Regulation.
The 2023 WOTUS rule and the proposed Clean Water Act rule
creating a new designated use (Tribal reserved rights) are
examples of EPA creating new, broad and expansive environmental
requirements that impose substantial burdens on the regulated
community and diminish delegated authorities to the states. An
alternative approach would be dialogue with state agencies and
stakeholders (including the regulated community) on better
definition of environmental issues and how existing rules and
programs cans address such challenges. In other words--looking
for cooperation rather than Federal control.
Create a Regulatory and Policy Environment that Supports Oil
and Gas Supply. Derivative products such as ammonia and
sulfuric acid are essential building blocks for fertilizers.
The impact of energy sector policies on fertilizer production
and costs is substantial. When natural gas is expensive,
domestic production of ammonia and other fertilizer inputs can
be negatively affected. This relationship was demonstrated in a
2009 USDA report analyzing increases in fertilizer prices
between 2002 and 2008.\26\ Likewise, fertilizer production
depends on sulfur (sulfuric acid), which is also derived from
oil and gas production.\27\
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\26\ Factors Contributing to the Recent Increase in U.S. Fertilizer
Prices, USDA ERS (Feb. 2009), at 8.
\27\ Also, it needs to be recognized that sulfur supply is also
important for the production of lithium. Sulfuric acid is a key
chemical needed in the processing of lithium ores.
Implement Policies that Support Free and Fair Trade. Fairly
traded imports will always compliment domestic manufacturing in
the U.S. market; however the Federal Government needs to use
appropriate trade remedies for unfairly traded fertilizer.
______
Submitted Letter by Hon. Brad Finstad, a Representative in Congress
from Minnesota
February 28, 2023
Hon. Thomas J. ``Tom'' Vilsack,
Secretary,
U.S. Department of Agriculture,
Washington, D.C.
Dear Secretary Vilsack,
We are writing to urge you to take immediate action by issuing an
extension of the Time-Limited Trial for pork processing plants in the
New Swine Inspection System (NSIS), avoiding another unnecessary hit to
our nation's hog farmers and the pork processing capacity they rely on.
As you know, on June 30, 2021, an estimated 2.5 percent of the pork
industry's slaughter capacity was taken off-line. Plants that had been
operating for years under the Hazard Analysis and Critical Control
Point (HACCP) Inspection Models Project (HIMP) program were required to
reduce production despite compelling data about the safety of NSIS
workers.
On March 4, 2022, nearly 9 months after the court-ordered slowdown,
the first NSIS plant was allowed to return to its former line speed,
through a 12 month Time-Limited Trial. We commend you for your work to
ensure these NSIS facilities were able to get back to their full
operational capacity, however, we are rapidly approaching the end of
the respective 12 month periods for the plants participating in the
trial.
Without an extension, producers will again be facing lost market
leverage and fewer options for selling their hogs, potential contract
cancellations, and greater transportation costs. Our family farmers,
the food supply chain, and consumers need the certainty that our pork
processing capacity will remain strong, and plants will not be forced
to reduce production and thereby hog purchasing.
Accordingly, we strongly urge you to issue an extension of the
Time-Limited Trial and provide written notice to NSIS plants prior to
the end of their 12 month trial. We also implore USDA to develop a
permanent solution for these facilities that allows them to function at
full operational capacity rather than continued short-term trials.
Thank you for your time and attention to this important matter.
Sincerely,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Hon. Chuck Grassley, Hon. Brad Finstad,
United States Senator Member of Congress
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Hon. John Boozman, Hon. Glenn Thompson,
United States Senator Member of Congress
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United States Senator Member of Congress
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Hon. Tracey Mann,
Member of Congress
______
Submitted Letter by Hon. John W. Rose, a Representative in Congress
from Tennessee
May 25, 2022
Hon. Gary Gensler,
Chairman,
Securities and Exchange Commission,
Washington, D.C.
Dear Chair Gensler,
We write to express significant concerns with the impact the
Securities and Exchange Commission's (SEC) proposed rule on ``Enhanced
and Standardization of Climate-Related Disclosures for Investors'' will
have on the agricultural community.
It is our strong belief that this proposed rule, if promulgated,
would be a significant and unworkable regulatory burden, and a
considerable departure from the SEC's mission to protect investors,
facilitate capital formation, and foster fair, orderly, and efficient
markets. It is not within the purview of the SEC to regulate farmers
and ranchers, which is what this rule would do by requiring public
companies to disclose their Scope 3 greenhouse gas (GHG) emissions. To
do business with public companies, small farms would be required to
disclose a significant amount of climate-related information. But
unlike large corporations, small farms do not have full-scale
compliance departments. Imposing these additional reporting
requirements could disqualify small, family-owned farms from doing
business with companies which could lead to more consolidation in the
agriculture industry.
Farmers are already regulated by agencies at the local, state, and
Federal levels. There are currently multiple programs at the Federal
level to help farmers implement conservation practices. Bureaucrats in
Washington, D.C.--specifically unelected SEC staff--who have no
jurisdiction over environmental policy and who have never stepped foot
on a farm should not have such influence over how farmers take care of
their land.
We also have concerns about the specific information from each farm
that would have to be reported under this proposal. The time and energy
put into complying with this new regulation will divert American
farmers away from their primary goal of producing our nation's food,
fuel, and fiber. As this rule is written, it is also unclear how
farmers will be protected from privacy concerns as they, unlike
corporations, live at their places of business where they would now
have to disclose significant amounts of information. In American Farm
Bureau Federation v. EPA, the 8th U.S. Circuit Court for Appeals
affirmed that public disclosure of farmers' personal information would
constitute a ``substantial'' and ``clearly unwarranted invasion of
personal privacy.'' \1\ Similarly, the SEC should consider how the
disclosure of Scope 3 GHG emissions could have privacy implications for
farmers and scrap this rule entirely to ensure their private property
information would not end up on any public disclosures.
---------------------------------------------------------------------------
\1\ American Farm Bureau Federation v. EPA, 836 F.3d 963 (8th Cir.
2016).
---------------------------------------------------------------------------
Finally, we are concerned that the comment period, although
recently extended until June, is inadequate given the magnitude of this
proposed rule, which totals 510 pages and has 1,068 technical
footnotes. The Commission's use of abbreviated comment periods for
complex rules like this as well as the lack of consistency across
rulemakings is troubling, as it will result in less, much-needed input
from the public on these important issues.
We appreciate your attention to our concerns and request a response
no later than June 24, 2022.
Sincerely,
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Hon. John W. Rose, Hon. Glenn Thompson,
Member of Congress Member of Congress
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cc:
Hon. Hester M. Peirce, Commissioner
Hon. Allison Herren Lee, Commissioner
Hon. Caroline A. Crenshaw, Commissioner
______
Supplementary Material Submitted by Peter Friedmann, Executive
Director, Agriculture Transportation Coalition
Insert
Mr. Davis of North Carolina. . . .
And I heard Mr. Duvall--and maybe I will just leave this as a
comment at this point as we run out of time. How do we really
make this nexus disconnection when there are so many job
opportunities with the lack of our students engaging? There is
some disconnect here that is going on.
Thank you Congressman Davis.
This is a very important question, as it is a challenge that is
facing all sectors of agriculture, all commodities, all geographies,
and all components. There is a significant shortfall of labor in
agriculture, exacerbated by the lack of a pipeline of young people
entering the agriculture supply chain--from the planting and
harvesting, to the raising of livestock and the processing industry,
the elevators and cold storage, the transport to the customer--all
modes, rail, truck, ocean--both international and domestic.
Simply not enough young people consider agriculture for a career.
Part of this is the urbanization of America, with a greater percentage
of the U.S. population clustered in cities and suburbs, every year. The
young people are simply not exposed to agriculture.
Part of it is the barriers thrown up by government and others--such
as the barriers facing a young person who wants, after high school to
become a truck driver. Licensing, insurance restrictions serve to
divert many who would consider obtaining a CDL and beginning to drive,
to other employment, such as construction. There are pilot programs at
Dept of Labor, but participation is quite limited as criteria are
restrictive; removing some of the restrict[i]ons would increase the
numbers. New driver training programs are currently proposed in
legislation, some in the T&I Committee's jurisdiction. The Committee is
urged to move forward this Session.
Our public schools, mainly high schools, need to offer an
introduction into careers in agriculture. These would be tailored to
the agriculture commodities in the region where the high school is
located. There are community colleges which are engaging with local
agriculture business, to provide internships. Those are invaluable,
with a very high success rate; while encouraging, there are not enough
of them.
Finally, another addition to the high school curriculum would be
immensely helpful, a basic course--where does our food come from? It
seems that a large segment of our country's population simply has no
idea where our food comes from--meat, dairy, cereals/bread/grains, etc.
Or how it gets to us.
The Agriculture Transportation Coalition would be honored to work
with both the Agriculture and T&I Committees, to develop a pilot
program to educate and prepare young people to enter the agriculture
production and transportation supply chain, authorized jointly by these
Committees and administered by USDA and DOT. We stand ready to work
with both Committees.
Thank you Mr. Davis for the opportunity to share some ideas that
could lead to expansion in young person participation in agriculture.
Peter Friedmann,
Executive Director,
Agriculture Transportation Coalition.
______
Supplementary Material Submitted by Mike Brown, President, National
Chicken Council
March 9, 2023
Chairman Thompson:
Thank you for your recent invitation to testify before the House
Committee on Agriculture on February 28, 2023, in the hearing entitled,
``Uncertainty, Inflation, Regulations: Challenges to American
Agriculture.''
In addition to the written testimony NCC submitted prior to the
hearing, NCC respectfully requests that the attached report from the
American Enterprise Institute entitled, ``Poultry Tournaments: Risk
Management or Just a Game of Chicken?'' be included in the
Congressional Record as supplementary material related to my testimony.
Respectfully,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mike Brown,
President, National Chicken Council.
attachment
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Poultry Tournaments: Risk Management or Just a Game of Chicken?
By Barry K. Goodwin
January [3,] 2023
Key Points
The four-firm industry concentration ratio for chicken
processors is lower than for pork or beef, but concerns about a
unique tournament contracting system have prompted calls for
increased oversight that would raise further concerns about
costs and the public release of confidential data.
However, competition through tournaments that offer farmers
significant risk protection has encouraged innovation that has
increased efficiency in poultry production, ultimately
benefiting growers and processors and lowering prices for
consumers.
Claims that tournaments lower poultry farmers' incomes do
not square with the evidence that on both median and average
poultry farms, household incomes are higher than those of both
other farm and non-farm households.
The Biden Administration seems to have decided that any suggestion
of market power by buyers of livestock from the farm is necessarily
harmful to farm businesses and consumers. Thus, the Administration's
argument continues, contracts between farms and processors should be
viewed as vehicles for hiding information about prices and enabling
further exercise of market power by processors that lower farm gate
prices and raise consumer prices.
Recent proposals to regulate and limit the tournament production
contracts widely used in the poultry industry are clear examples of the
Administration's approach. However, there is no evidence to support the
claims that contracting in the livestock industry has harmed farm gate
prices or consumer welfare. On the contrary, by creating incentives for
improved product quality, quality-based contracts have greatly
benefited the beef industry and consumers.\1\
---------------------------------------------------------------------------
\1\ Ted C. Schroeder, ``Policies That Support Growth in Beef Demand
Drive Industry Prosperity and Benefit Consumers,'' American Enterprise
Institute, November 2, 2022, https://www.aei.org/research-products/
report/policics-that-support-growth-in-beef-demand-drive-industry-
prosperity-and-benefit-consumers.
---------------------------------------------------------------------------
Similarly, as discussed in this report, tournament contracts in the
poultry industry have provided incentives for increased efficiency and
lower production costs. In fact, there is overwhelming empirical
evidence that concentration and contracting have enabled livestock
markets to function more efficiently, with benefits for all
participants--farmers, processors, and consumers. In short, when it
comes to contracting and concentration in the livestock industry, the
message to the Biden Administration and other critics should be:
``Don't mess with success.''
Marketing and Production Contracts in Agriculture
The U.S. livestock industry has gradually transitioned to a system
under which contracts often govern marketing and production. Figure 1
provides information about the extent of marketing and production
contracts for individual crops and livestock commodities in the U.S.,
and Figure 2 shows the extent to which such contracting increased
between 1996 and 2020.
Marketing contracts, widely used for crops, differ from production
contracts in that the farmer retains ownership of the product, and
prices, or pricing mechanisms (for example, through the use of futures
contracts), are set before marketing.
Production contracts are more common for livestock commodities and
extensively used in the pork and poultry sectors. In such contracts,
farmers provide management, labor, and production assets, while
processors, often called integrators,\2\ provide most of the inputs,
including the beginning stock (e.g., piglets and chicks), feed,
veterinary services, and other variable inputs.
---------------------------------------------------------------------------
\2\ Processors in the poultry and pork industry are called
integrators because they vertically integrate different stages of
production.
---------------------------------------------------------------------------
For broilers--chickens raised for meat--over 90 percent of
production is managed under contracts.\3\ Typically, the integrator
owns the animals, and the farmer follows prescribed methods of
production. This form of production contract is also becoming more
common in the beef cattle industry. When livestock reach the
appropriate size and age, a processor takes delivery and manages
slaughtering, processing, and marketing the meat products.
---------------------------------------------------------------------------
\3\ See Linda Qiu, ``Biden Administration Aims to Increase
Regulation and Competition in the Poultry Industry,'' New York Times,
May 26, 2022, https://www.nytimes.com/2022/05/26/business/biden-
poultry-processors-growers.html.
---------------------------------------------------------------------------
Production contracts are widely used in livestock markets where
production can be confined and controlled to obtain more consistent
product quality and for attributes preferred by consumers. They are
often criticized as lacking in transparency because their terms are
usually confidential. Further, when most production is commissioned
through contracts, prices in cash markets may not be relevant for
farmers' and processors' production decisions and may be lower and more
volatile because animal quality cannot be guaranteed and is likely to
be lower.
Market Concentration
The meat industry has also become highly concentrated, with a small
number of processors handling a significant share of production. A
White House press release noted, with significant alarm,
Four large meat-packing companies control 85 percent of the
beef market. In poultry, the top four processing firms control
54 percent of the market. And in pork, the top four processing
firms control about 70 percent of the market. . . . When
dominant middlemen control so much of the supply chain, they
can increase their own profits at the expense of both farmers
who make less--and consumers--who pay more. Most farmers now
have little or no choice of buyer for their product and little
leverage to negotiate, causing their share of every dollar
spent on food to decline.\4\
---------------------------------------------------------------------------
\4\ White House, ``Fact Sheet: The Biden-Harris Action Plan for a
Fairer, More Competitive, and More Resilient Meat and Poultry Supply
Chain,'' press release, January 3, 2022, https://www.whitehouse.gov/
briefing-room/statements-releases/2022/01/03/fact-sheet-the-biden-
harris-action-plan-for-a-fairer-more-competitive-and-more-resilient-
meat-and-poultry-supply-chain.
There are many good reasons for concentration in the livestock
industry related to economic efficiency and substantially reduced
production cost. However, alarmists often point to concentration as de
facto proof of price discrimination through market power without
examining the evidence.
The White House press release, for example, claims that ``the meat
and poultry processing sector is a textbook example [of a] lack of
competition hurting consumers, producers, and our economy.'' \5\ In
fact, in the livestock processing sector, average costs fall
substantially as scale increases, resulting in market concentration and
some degree of market power. The empirical evidence is clear:
Concentration has lowered processing costs, and processor marketing
margins sufficiently result in higher prices for farmers' livestock and
lower prices for consumers at the grocery store.\6\ Bigger is indeed
sometimes better, for everyone.\7\
---------------------------------------------------------------------------
\5\ White House, ``Fact Sheet: The Biden-Harris Action Plan for a
Fairer, More Competitive, and More Resilient Meat and Poultry Supply
Chain.''
\6\ Ted Schroeder's recent comprehensive review of the empirical
literature examining the impact on contracting and market concentration
on beef prices and quality provides compelling support for this
conclusion. See Schroeder, ``Policies That Support Growth in Beef
Demand Drive Industry Prosperity and Benefit Consumers.''
\7\ In fact, any link between market concentration and market power
without detailed information about purchasing and marketing practices
is purely speculative and tenuous. A high degree of competition may
exist even when three of four large companies seem to dominate the
market. For example, the White House press release notes that the four-
firm industry concentration ratio for poultry is 54 percent but fails
to note that many other processing companies produce the remaining 46
percent of production.
---------------------------------------------------------------------------
Toumament Production Contracts
The Biden Administration has expressed many concerns about the lack
of competition in the meat-processing sector, many of which are not
consistent with the evidence about the impacts of increased
concentration on either prices received by farmers or prices paid by
consumers.\8\ The high level of market concentration in poultry
processing has received special attention. In contrast to contract
arrangements for cattle and pork, poultry contracts operate uniquely by
using a tournament system to reward producers.
---------------------------------------------------------------------------
\8\ See Ted C. Schroeder, ``Subsidized Beef Packing Expansion
Unlikely Sustainable,'' American Enterprise Institute, February 1,
2022, https://www.aei.org/research-products/report/subsidized-beef-
packing-expansion-unlikely-sustainable; Vincent H. Smith and Benjamin
Goren, ``Where's the Pork in the Surge in Recent Pork Prices? Maybe
Nowhere, and Not in the Meatpacking Industry,'' American Enterprise
Institute, February 1, 2022, https://www.aei.org/research-products/
report/wheres-the-pork-in-the-surge-in-recent-pork-prices-maybe-
nowhere-and-not-in-the-meatpacking-industry; and Schroeder, ``Policies
That Support Growth in Beef Demand Drive Industry Prosperity and
Benefit Consumers.''
---------------------------------------------------------------------------
Figure 1. Production and Marketing Contracting by Commodity in 2020
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: U.S. Department of Agriculture, Economic Research
Service, ``Farm Structure and Contracting,'' https://
www.ers.usda.gov/topics/farm-economy/farm-structure-and-
organization/farm-structure-and-contracting.
Figure 2. Changes in the Adoption of Marketing and Production
Contracts, 1996-97 to 2020
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Note: This figure includes the value of production under
marketing and production contracts combined. An average of 1996
and 1997 was used to provide a more statistically reliable
estimate. No tobacco production was covered by contracts in
1996-97.
Source: Christine Whitt, ``Farmers' Use of Contracts Has
Declined over Last 25 Years,'' U.S. Department of Agriculture,
Economic Research Service, June 23, 2022, https://
www.ers.usda.gov/amber-waves/2022/june/farmers-use-of-
contracts-has-declined-over-last-25-years.
Under that system, producers are rewarded using metrics about their
performance relative to other similarly situated producers regarding
feeding efficiency, quality, medical costs, flock mortality rates, and
other factors, all of which affect production costs and the value of
the birds.\9\ Thus, rewards are typically based on a comparison of
overall production costs (chick, feed, and medical costs) per pound of
meat produced relative to other producers in each group of growers.
Contracts are often automatically renewed unless the farm fails to
comply with their terms, including following the production practices
prescribed in the contracts.
---------------------------------------------------------------------------
\9\ For a detailed description of the tournament system for broiler
production, see Charles R. Knoeber, ``A Real Game of Chicken:
Contracts, Tournaments, and the Production of Broilers,'' Journal of
Law, Economics, and Organization 5, no. 2 (Autumn 1989): 271-92.
---------------------------------------------------------------------------
Critics of the tournament system have pointed to a 2011 U.S.
Department of Agriculture (USDA) report that found that although farm
households that raise broilers have higher incomes, they experience
more variation in household incomes.\10\ In 2011, as shown in Figure 3,
at the 80th percentile, broiler growers had household incomes of
$143,294, compared to only $114,417 for other farm households and
$101,582 for all U.S. households. Median household incomes for the same
relative comparisons are $68,445, $57,050, and $50,504, suggesting that
more than \1/2\ of all broiler households had significantly higher
incomes than other farm households and U.S. households in general. At
the bottom end of the income distribution, broiler producers do a
little worse, though the differences are modest.
---------------------------------------------------------------------------
\10\ See James M. MacDonald, ``Financial Risks and Incomes in
Contract Broiler Production,'' U.S. Department of Agriculture, Economic
Research Service, August 4, 2014, https://www.ers.usda.gov/amber-waves/
2014/august/financial-risks-and-incomes-in-contract-broiler-production.
---------------------------------------------------------------------------
Figure 3. Broiler Contract Growers' Incomes Relative to Other Farmers'
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: James M. MacDonald, `` Financial Risks and Incomes in
Contract Broiler Production,'' U.S. Department of Agriculture,
Economic Research Service, August 4, 2014, https://
www.ers.usda.gov/amber-waves/2014/august/financial-risks-and-
incomes-in-contract-broiler-production.
Some commenters have used these findings to argue that incomes of
broiler households vary more than incomes of other farm and non-farm
households. However, most of the differences occur at the upper end of
the income distribution. Thus, the reasonable evidence-based conclusion
is that broiler production under tournament contracts tends to result
in substantially higher incomes than those of other farm households and
U.S. households in general.\11\ Broiler production appears to be a
viable and rewarding business, likely because it is largely driven by
tournament contracts that incentivize poultry farms to be innovative
and efficient.
---------------------------------------------------------------------------
\11\ As an aside, median farm households made about $4,500 more per
year than the median U.S. household did, and broiler producers made
even more--about $18,000 more in 2011.
---------------------------------------------------------------------------
The extent of that innovation is reflected by the significant
changes in poultry production that have taken place. While prices for
chicken have fallen, broiler production has been profitable in recent
years because of advances in production techniques that increased
yields and lowered costs. In 1955, it took 73 days to produce the
average broiler, which weighed 3.1 pounds and required 2.85 pounds of
feed for each pound of chicken produced. By 2011, it took only 38 days
to produce a 4 pound broiler, requiring only 1.74 pounds of feed for
each pound of gain.\12\ In response to lower costs and prices (in
inflation-adjusted terms), chicken consumption has increased
substantially, and today consumers buy more chicken than beef.
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\12\ Production statistics were taken from James M. MacDonald,
``Technology, Organization, and Financial Performance in U.S. Broiler
Production,'' U.S. Department of Agriculture, Economic Research
Service, June 2014, https://www.ers.usda.gov/webdocs/publications/
43869/48159_eib126.pdf. James MacDonald quotes statistics from an
earlier U.S. Department of Agriculture report. Floyd A. Lasley, ``The
U.S. Poultry Industry: Changing Economics and Structure,'' U.S.
Department of Agriculture, Economic Research Service, July 1983,
https://naldc.nal.usda.gov/download/CAT84800258/PDF.
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The Biden Administration has criticized tournaments as both a
source and a reflection of processor market power.\13\ In that context,
along with other proposals for ``reforming'' beef and other livestock
markets, the Administration has proposed new rules, claiming it will
improve the ``fairness'' of poultry contracts. The USDA intends to
implement these proposed rules, which would significantly change the
poultry tournament system.
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\13\ Secretary of Agriculture Thomas Vilsack, for example, has
stated that the proposed rule ``ultimately will help us give farmers
and ranchers a fair shake, strengthen supply chains and make food
prices fairer.'' See Qiu, ``Biden Administration Aims to Increase
Regulation and Competition in the Poultry Industry.''
The tournament system provides incentives for growers to
minimize mortality rate, maximize feed efficiency, and reduce
---------------------------------------------------------------------------
production costs.
In fact, tournaments are a particular type of risk-sharing
arrangement. Because payment is based on performance relative to peers,
system-wide risks that affect all growers are shifted to the processor.
These include losses due to factors such as weather and widespread
diseases. Through the tournaments, integrators are guaranteed access to
a reasonable level of production, and growers are guaranteed a minimum
level of compensation and a market for their output. They are also
guaranteed supplies of some of their inputs, such as feed, at a fixed
cost. Thus, the tournament system provides incentives for growers to
minimize mortality rate, maximize feed efficiency, and reduce
production costs. Moreover, Chuck Knoeber and Walter Thurman found that
tournament contracts shifted nearly all feed and product price risks,
and most systemic production risks, from producers to processors.\14\
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\14\ Charles R. Knoeber and Walter N. Thurman, `` `Don't Count Your
Chickens . . .': Risk and Risk Shifting in the Broiler Industry,''
American Journal of Agricultural Economics 77, no. 3 (August 1995):
486-96.
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A tournament contract exists only for the life of a single
contract. Thus, growers do face some risks. For example, an integrator
may close a plant and stop accepting broilers. This risk is a
significant concern since many growers substantially invest in fixed
assets such as chicken houses and production facilities. Another risk
is associated with flock placements. Depending on the desired bird
size, grow out may take 38-61 days. Once a flock has been shipped for
processing, growers must clean and repair facilities and await
placement of the next flock. James MacDonald reports an average wait
time of 16-17 days for the next flock, although 25 percent of growers
reported waiting 20 days or more, reducing their revenues and
profits.\15\
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\15\ MacDonald, ``Financial Risks and Incomes in Contract Broiler
Production.''
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Changes Proposed by the Biden Administration
Tournaments have been profitable for growers and incentivize
technological innovation, but some commenters see them as just another
unfair production practice that allows processors to price discriminate
against individual growers. The USDA Agricultural Marketing Service has
proposed revisions to the Packers and Stockyards Act of 1921 that would
fundamentally alter the use of tournaments in poultry production. The
proposals would mandate the disclosure of information used by
processors in determining the premiums and discounts associated with
production differences among growers. Thus, Secretary of Agriculture
Thomas Vilsack has claimed that these actions ``ultimately will help us
give farmers and ranchers a fair shake, strengthen supply chains and
make food prices fairer.'' \16\
---------------------------------------------------------------------------
\16\ Qiu, ``Biden Administration Aims to Increase Regulation and
Competition in the Poultry Industry.''
---------------------------------------------------------------------------
The new rules would require integrators to disclose details about
how payments are determined for other growers in a tournament group.
The rules would also require disclosure of feed use, chick placements,
and the detailed ranking of individual growers within their tournament
group. Processors would also face a mandate to guarantee a minimum
number of chicks and stocking density that they would place with each
grower in a year.
When each flock and tournament is settled, a processor would have
to provide every grower with a ranking sheet that reveals their exact
position relative to every one of their competitors. The sheet would
include growers' housing characteristics and the metrics used to
generate rankings or scores, including details on the distribution of
inputs; the names, sexes, and ratios of specific breeds; and each
breeder's facilities, flock ages, and feed disruptions. While growers'
names would not be included, the detailed information would enable
competitors to identify other growers in most situations.
The rules would also require processors to provide a summary of all
bankruptcies and litigation involving the integrator and its growers
over the previous 6 years. The processor would also have to provide a
statement outlining the policies and procedures that apply when a
grower's facilities are either sold or assigned to another processor.
Finally, if the 5 year average of gross payments does not accurately
reflect a projection of future payments, a processor would have to
supply the reasons for the discrepancy to growers.
The required information would essentially make details
regarding individual production practices widely known, and
such information could be used to affect other aspects of
business practices among poultry farmers.
The Administration and others argue that these changes would
improve transparency in the tournament system. The required information
would essentially make details regarding individual production
practices widely known, and such information could be used to affect
other aspects of business practices among poultry farmers. For example,
a lender would have access to detailed performance information about
growers with whom they do not have a business relationship.
The public disclosure of businesses' confidential information has
raised a number of concerns regarding unfair business practices. Agri
Stats is a firm that collects detailed information from processors and
then provides this information anonymously to anyone willing to pay for
its service. Extensive litigation has occurred because Agri Stats
provides such information, in which it has been alleged that such
information could be used to conduct nefarious business practices,
paradoxically including the more extensive practice of price
discrimination.
To the extent that the tournament system provides effective risk
sharing and has motivated improved efficiency and positive
technological innovation in the industry, disruptions to the system
could hurt growers, consumers, and processors.
Concluding Remarks
The tournament contract system that dominates poultry production
has developed in response to the needs and options available to both
farmers and processors in the industry. Processors want a consistent
supply of high-quality broilers, and the confined nature of poultry
production has allowed careful genetic selection and precise production
practices to provide that outcome. Despite assertions that poultry
farmers are suffering because of the system, poultry farmers enjoy much
higher incomes on average than those received by other farm and non-
farm households.
The USDA study by MacDonald reported that, in 2011, the average
income of households with contract poultry production was twice as
large as the average income of U.S. households in general. Contract
poultry growers had gross farm incomes that averaged $233,000, of which
71 percent came from tournament and other production contract fees. The
study also noted that most contract growers do not raise any other
livestock and that \1/3\ of poultry farmers have no cropland. Further,
over \1/2\ of contract growers had no agricultural commodity
enterprises (for example, raising corn or managing an apple orchard)
beyond their poultry operation. Contract growers also tended to be
part-time farmers who devote only 28-40 hours of labor per week to the
operation.\17\
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\17\ MacDonald, ``Financial Risks and Incomes in Contract Broiler
Production.''
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The Biden Administration's proposed changes may disrupt this system
and could lower poultry producers' earnings and incomes. The provision
of private business information specific to an operation could result
in economic losses if such information were used to discriminate
against growers because of characteristics other than their efficiency
in producing poultry. If the system changes in ways that lessen rewards
for superior performance, poultry products will likely be lower
quality, more costly to produce, and, because of those higher costs,
more expensive for consumers. Not exactly what the doctor ordered.
About the Author
Barry K. Goodwin is the William Neal Reynolds Distinguished
Professor of Agriculture and Resource Economics at North Carolina State
University and a nonresident scholar at the American Enterprise
Institute.
2023 by the American Enterprise
Institute for Public Policy Research. All rights reserved.
The American Enterprise Institute (AEI) is a nonpartisan,
nonprofit, 501(c)(3) educational organization and does not take
institutional positions on any issues. The views expressed here
are those of the author(s).
______
Supplementary Material Submitted by Robert L. Larew, President,
National Farmers Union
Insert
Mr. Vasquez. . . . To any one of our panelists, how can we
address the disparity of rural versus urban inflation and
provide relief and make good policy that helps support rural
Americans that live outside of major cities?
Mr. Larew. It is a good question. I am not sure I have--I
would love to follow up as well.
The Consumer Price Index (CPI) does not accurately display a
meaningful measurement, and I agree it does not display both urban and
rural numbers. When looking to ease rural inflation costs, we need to
be talking about the urban-rural inflation gap and look at ways to
close it. Factors that contribute to this disparity can be attributed
to increased fuel costs, supply chain disruptions, higher input costs,
or paying more for healthcare.
The cost of travel must be reflected in CPI calculations for rural
areas. Rural Americans must travel longer distances to do business,
access essential services, and be a part of their communities. In
recent years, supply chain disruptions have made long-distance travel a
necessity. Farmers have had to haul crops to elevators that are farther
away and oftentimes need to cross multiple counties to buy farm inputs.
For essential services such as healthcare, insurance costs are on the
rise and with many rural hospitals shutting down it all comes down to
having to travel far for access or forgoing treatment altogether.
Congress can look at ways to provide relief in any of these areas.
Investing in rural economies to boost resilient and competitive
industries can ensure that the uneven effects of inflation do not have
an extreme effect on our communities. Investing in biofuels
infrastructure helps farmers' bottom line and helps consumers save at
the pump. We need to look at how consolidation prevents our supply
chains from running smoothly and enact stronger antitrust laws and we
should also consider what is driving the cost of inputs for family
farmers and ranchers. Last, Congress and the Biden Administration
should help existing rural healthcare services that are on the brink of
collapse and find ways to bolster our healthcare providers for the
years to come.
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