[Congressional Record Volume 143, Number 9 (Wednesday, January 29, 1997)]
[Senate]
[Pages S787-S789]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 GIVING PRIORITY TO OUR FOOD PRODUCERS

  Mr. DORGAN. Mr. President, America's family farmers and ranchers 
deserve a high priority in the legislative agenda of this new Congress. 
The families who produce our daily food and help feed a hungry world, 
have not been on the center stage here in the Nation's Capitol. They 
deserve our attention and our concern.
  The 7-year farm bill that was passed in the last session of Congress 
is an economic disaster in the making for rural America. All that needs 
to happen is for mother nature to bless us with abundant crops, and 
farm prices will once again fall. Under that new farm law, there is no 
safety net for our nation's farm and ranch families, who provide the 
economic base of rural America.
  That is why I could not support that legislation. That is why 
President Clinton was very reluctant about signing this bill into law. 
If you remember, he only did so because further delay of the farm bill 
would have created planning chaos for farmers as they prepared for and 
began their spring's work last year.
  In the closing debates of the farm bill, I said that we would have to 
come back to this issue when farm prices fall as they inevitably do. 
Well, the glow of high grain prices has faded and the reality of 
increased production costs has come home to hundreds of thousands of 
farm families.
  It is time to consider what responsibility we as a nation have to 
those who grow our daily food.
  It was important that on the very first day for the introduction of 
legislation in the 105th session, that we paid attention to 
agriculture. It is not only the key economic sector in rural America, 
but also continues to be the single largest industry in our Nation.
  I am pleased that the minority leader, Senator Tom Daschle, 
introduced two bills that day as part of his leadership package to deal 
directly with the problems facing our family farmers and ranchers. I am 
proud to be a cosponsor on both bills.


                 CATTLE PRICES AND MARKET CONCENTRATION

  One of the most immediate problems facing rural America is the 
continuing low prices that our cattle producers are facing. While these 
low prices can be attributed to some extent to the periodic pricing 
cycle in cattle, we should not ignore some of the fundamental changes 
that have occurred within our Nation's livestock marketing system in 
recent times.
  The Cattle Industry Improvement Act of 1997--S. 16--which I have 
cosponsored, begins addressing some of the underlying questions that 
face our farmers and ranchers as they market their livestock.
  The bill will help bring the livestock pricing structure into the 
open daylight. It requires the Secretary of Agriculture to establish a 
price-reporting system in which slaughtering firms would have to report 
the prices paid and the terms of sale to the Department of Agriculture. 
Smaller slaughtering firms would be exempted, but would be encouraged 
to do voluntary reporting.
  It also gives the Secretary of Agriculture additional rulemaking 
authority to foster improved competition among packers in buying 
cattle. This would strengthen the ability of the Secretary to take the 
proactive actions needed to ensure a healthy competitive environment in 
today's cattle-marketing structures. It underscores the very purposes 
for which the Packers and Stockyards Act was established.
  Last year the USDA Advisory Committee on Market Concentration 
concluded that the price reporting and price discovery system in the 
cattle market was a relic of days gone by. In fact, less than 2 percent 
of fed cattle go through terminal markets where prices for livestock 
are established through an open and competitive bidding process.
  Essentially, cattle producers face a black hole when it comes to 
being able to accurately determine what is really happening in the 
marketplace. We need to give the Department of Agriculture the 
necessary tools to reach into this black hole and get accurate market 
information for our producers. Our price reporting system needs to be 
updated with the changes in the marketplace.


                FOUR FIRMS CONTROL 80 PERCENT OF MARKET

  The lack of solid market information on livestock is compounded by 
the concentration in the marketplace. Today, four firms control more 
than 80 percent of steer and heifer slaughter. In fact, three firms by 
themselves have over 80 percent of that slaughter. By any economic 
measure this is a very high level of concentration.
  In contrast there are some 1.2 million farmers and ranchers across 
the country that produce our Nation's cattle. In other words more than 
80 percent of the output of 1.2 million farmers and ranchers is 
funneled through only 4 firms. This is an enormous economic bottleneck.
  Since 1980, the top four slaughtering firms have more than doubled 
their share of the market. They have moved from a 36-percent market 
share to an 82-percent market share.
  When there is an underlying illness, symptoms of that illness often 
do not appear until the system comes under serious stress. The same is 
true in economic situations. We have a serious underlying economic 
disease in our livestock industry: a highly concentrated marketplace.

  The symptoms have become more evident under the stress of the low end 
of the cattle price cycle. The lack of market power for our producers 
at the bottom rung should be self evident.
  The USDA Advisory Committee on Concentration can best be summarized 
by a sentence from the minority report. The report stated:

       The upper levels maintain profit margins of various sizes 
     within the production cycles, and the lowest, least 
     concentrated levels have become the primary shock absorbers 
     for fluctuations in the commodity cycle.

  Coming from a State in which cattle producers are primarily cow-calf 
operators, I can certainly attest to this statement. Our cow-calf 
operators have seen their prices cut in half. They have been taking the 
brunt of this pricing cycle.
  A few weeks ago I received a copy of a newspaper article about Al and 
Gene Urlacher of New England, ND. These two brothers brought a week-old 
dairy bull calf to the auction sales ring. Three years ago that calf 
would have sold for $175. What did they get?
  They got a $10 bid for this calf. It cost them $8.55 in auction fees, 
so they

[[Page S788]]

split $1.45 between them. That means that each of them got 72 cents in 
their pocket, which did not even cover the cost of their gas to bring 
the calf to market. Nor would it buy a Big Mac for lunch that day. Yet 
these brothers thought they were lucky. Others who had brought calves 
to the sales ring that day didn't even get a bid.


             FARMER'S SHARE OF RETAIL BEEF DOLLAR DECLINES

  Let's look at the farmers' share of the retail beef dollar during the 
same period of time when the top four slaughtering firms more than 
doubled their market share.
  In 1979, our Nation's farmers and ranchers received 64 percent of the 
retail price of beef. This past year, their share of the beef dollar 
was down to 48 percent. The long-term trend line demonstrates what has 
been happening to the market power of our producers.
  As cattle prices have dropped in the past 3 years, the drop in the 
farm share of the retail beef dollar has been even more dramatic. It 
moved from 56 percent in 1993 down to 48 percent this past year.
  The bill before us today is a rather modest proposal. It requires 
price disclosure so that everybody in the livestock business knows what 
is being paid and the terms of the sales. The base of this bill is to 
provide more information to those that participate in the livestock 
market.
  The bill would also give the Secretary the needed rulemaking 
authority to more effectively carry out the provisions of the Packers 
and Stockyards Act. In addition, it would provide protection to 
livestock producers who do some whistleblowing from retaliation by 
cattle buyers. These are important steps to bring some daylight into 
the livestock pricing system.
  Our bill would also establish a voluntary labeling system for meat 
produced in the United States, and requests USDA to convene a public 
meeting to consider the potential of allowing State-inspected meat and 
meat products in interstate commerce.
  It also calls upon Secretary of Agriculture to immediately work with 
the Agriculture Minister of Canada to develop a meaningful cattle data 
exchange system so that United States producers have better information 
on Canadian cattle production.
  This legislation also addresses two trade concerns. First, it would 
require the U.S. Trade Representative to determine whether the European 
Union has violated its obligations under international law concerning 
the certification of U.S. meat export facilities.
  Second, it establishes an annual procedure by which the U.S. Trade 
Representative would identify priority countries that maintain barriers 
to U.S. livestock and meat exports, including sanitary standards.


               REBUILDING A SAFETY NET FOR FARM FAMILIES

  The second bill that I cosponsored with Senator Daschle on the first 
day of bill introduction was S. 16, the Agricultural Safety Net Act of 
1997. This legislation is a solid beginning to address the problems 
faced by our grain producers as they face declining prices.
  Over the years there has been great variability in the prices 
received by America's farmers. During the last decade we have seen our 
wheat prices shift from a low of $2.42 per bushel in 1986 to the 
unusually high price of $4.45 per bushel this past year.
  In fact, had it not been for the unique pricing conditions in our 
grain sector during the past 2 years, it is very unlikely that the 
freedom-to-farm bill would have ever been enacted into law, because our 
new farm eliminated the safety net to help our producers through low 
markets.
  We have to be honest and admit that we do not have a level playing 
field for our grain producers in this new global economy. Too 
frequently our wheat producers are not competing against wheat 
producers in other countries, but are competing against the national 
treasuries of countries which continue to provide export subsidies to 
move their surplus production into the world market.
  The irony of this past year is that wheat prices received by farmers 
across the Nation peaked just after our planting season. Our farmers 
responded to the marketplace by planting more wheat. They did the very 
thing the market indicated and made the extra investments to get a good 
crop. Now they are being rewarded for their good efforts with lower 
prices.
  Wheat prices have been falling ever since this spring. In recent 
weeks, I have received many reports of wheat prices at below $3.50 per 
bushel at local elevators in my home State of North Dakota. The fact is 
that these prices are well below the full economic costs of production 
of recent years.
  Our producers need a working safety net. The farm law has established 
price supports at 85 percent of the moving Olympic average of prices 
received by farmers during the past 5 years, dropping the high and low 
years.
  The marketing assistance loans are supposed to help farmers move 
through the fluctuations of the market, and give them a means by which 
to hold their grain off the market so that they could make the best of 
their marketing opportunities.
  While the farm law has the promise of these marketing assistance 
loans, it reneges on that promise by establishing a cap on these 
commodity loans at $2.58 per bushel on wheat and $1.89 per bushel on 
corn.
  That makes these loans almost meaningless, especially for our 
beginning and other low-equity producers who have to sell their crops 
to pay their bills at harvest time. With the cap, these loan rates 
aren't high enough to cover even their out-of-pocket expenses, without 
considering their machinery and land costs.
  The Agricultural Safety Net Act of 1997 would eliminate these caps on 
the marketing assistance loans. That would mean a commodity loan rate 
of about $3.72 for wheat and $2.64 on corn for this year's crops. That 
would make a world of difference to our producers. It would provide 
them some marketing flexibility and give them an opportunity to take 
advantage of market advances when they occur.
  Another key feature of this bill is that it gives the Secretary of 
Agriculture the authority to extend the marketing assistance loans for 
an additional 5 months. That would also give additional opportunity for 
our producers to ride out the market.


                      EXPAND CROP REVENUE COVERAGE

  Together with these improvements, the Agricultural Safety Net Act of 
1997 would require the Secretary of Agriculture to offer a nationwide 
program of crop revenue insurance through the Federal Crop Insurance 
Corporation of wheat, feed grains, and soybeans.
  Federal Crop has been conducting pilot programs on revenue and income 
insurance for producers. I am pleased that the crop revenue insurance 
program for wheat has been extended to many counties in North Dakota. I 
had sought inclusion of the entire State in this pilot program.
  The crop revenue coverage pilot program has been very successful and 
received high interest and participation of producers where it has been 
available. This bill would move us out of the pilot program stage into 
a national program that would help producers with the twin risks of 
weather and price.


                         BUILDING FARMER CO-OPS

  Another way that farmers have been able to meet the challenges of 
today's marketplace has been through the development of a new 
generation of value-added cooperatives. Back home in North Dakota this 
has become known as co-op fever.
  These co-ops are a way for farmers to extend their influence in the 
marketplace. They not only add value to their production, but also they 
are moving these products further down the chain closer to the ultimate 
consumer.
  This legislation would require the Secretary of Agriculture to give a 
high priority to loan and grant applications under the Consolidated 
Farm and Rural Development Act to farmer-owned, value-added processing 
facilities.
  It would help make the development of farmer cooperative processing a 
priority in the rural development activities of this Nation.
  These two bills which I cosponsored as part of the leadership package 
of priority bills are important steps to restoring opportunity for 
rural Americans. They represent a new beginning in our efforts to 
empower rural Americans and help them build a better society for 
themselves and the entire Nation.
  These bills will need to be expanded with other legislative efforts 
during this session of Congress. They are simply the beginning 
foundation of how we

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can reshape Government so that we can provide rural Americans the tools 
they need to meet the challenges of our global marketplace.
  I commend Senator Daschle for his work in the development of these 
bills. The priority that he has given to agriculture in introducing 
these bills as part of his leadership package is most welcome and most 
appropriate. I am proud to be part of his leadership team and a 
cosponsor of these two bills.
  Both of these bills recognize that our Nation's family farmers and 
ranchers are the economic lifeblood of rural America. When they do 
well, rural America does well.

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