[Congressional Record Volume 148, Number 108 (Thursday, August 1, 2002)]
[Senate]
[Pages S7937-S7938]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Feingold):
  S. 2867. A bill to amend the Agricultural Marketing Act of 1946 to 
increase competition and transparency among packers that purchase 
livestock from producers; to the Committee on Agriculture, Nutrition, 
and Forestry.
  Mr. GRASSLEY. Mr. President, as everyone knows, I pushed the packer 
ban because I want more competition in the marketplace. While I don't 
think packers should be in the same business as independent livestock 
producers, it's not the fact that the packers own the livestock that 
bothers me as much as the fact that the packers' livestock competes for 
shackle space and adversely impacts the price independent producers 
receive.
  My support of the packer ban is based in the belief that independent 
producers should have the opportunity to receive a fair price for their 
livestock. The last few years have led to widespread consolidation and 
concentration in the packing industry. Add on the trend toward vertical 
integration among packers and there is no question why independent 
producers are losing the opportunity to market their own livestock 
during profitable cycles in the live meat markets.
  The past CEO of IBP in 1994 explained that the reason packers own 
livestock is that when the price is high the packers use their own 
livestock for the lines and when the price is low the packers buy 
livestock. This means that independent producers are most likely being 
limited from participating in the most profitable ranges of the live 
market. This is not good for the survival of the independent producer.
  My new legislative concept would guarantee that independent producers 
have a share in the marketplace while assisting the mandatory price 
reporting system. The proposal would require that 25 percent of a 
packer's daily kill comes from the spot market. By requiring a 25 
percent spot market purchase daily, the mandatory price reporting 
system which has been criticized due to reporting and accuracy problems 
would have consistent, reliable numbers being purchased from the spot 
market, improving the accuracy and transparency of daily prices. In 
addition, independent livestock producers would be guaranteed a 
competitive position due to the packers need to fill the daily 25 
percent spot/cash market requirement.
  This isn't the packer ban. The intent of this piece is to improve 
price transparency and hopefully the accuracy of the daily mandatory 
price reporting data. I feel strongly that packers should NOT be able 
to own or feed livestock, but this approach is not intended to address 
my concern with packer ownership.
  The packs required to comply would be the same packs required to 
report under the mandatory price reporting system. Those are packs that 
kill either 125,000 head of cattle, 100,000 head of hogs, or 75,000 
lambs annually, over a 5 year average.
  Packers are arguing that this will hurt their ability to offer 
contracts to producers, but the fact of the matter is that the majority 
of livestock contracts pay out on a calculation incorporating mandatory 
price reporting data. If the mandatory price reporting data is not 
accurate, or open to possible manipulation because of low numbers on 
the spot market, contracts are not beneficial tools for producers to 
manage their risk. This legislative proposal will hopefully give 
confidence to independent livestock producers by improving the accuracy 
and viability of the mandatory price reporting system and secure fair 
prices for contracts based on that data.
  It's just common sense, when there aren't a lot of cattle and pigs 
being purchased on the cash market, it's easier for the mandatory price 
reporting data to be inaccurate or manipulated. The majority of 
livestock production contracts are based on that data, so if that 
information is wrong the contract producers suffer. That's why the Iowa 
Pork Producers, Iowa Cattlemen, Iowa Farm Bureau, R-CALF, the 
Organization for Competitive Markets, and the Center for Rural Affairs 
have all endorsed this proposal.
  Mr. President, this legislation will guarantee independent livestock 
producers market access and a fair price. It will accomplish these 
goals by making it more difficult for the mandatory price reporting 
system to be manipulated because of low numbers being reported by the 
packs.
  I ask consent the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2867

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SPOT MARKET PURCHASES OF LIVESTOCK BY PACKERS

       Chapter 5 of subtitle B of the Agricultural Marketing Act 
     of 1946 (7 U.S.C. 1636 et seq.) is amended by adding at the 
     end the following:

     ``SEC. 260. SPOT MARKET PURCHASES OF LIVESTOCK BY PACKERS.

       ``(a) Definitions.--In this section:
       ``(1) Cooperative association of producers.--The term 
     `cooperative association of producers' has the meaning given 
     the term in section 1a of the Commodity Exchange Act (7 
     U.S.C. 1a).
       ``(2) Covered packer.--
       ``(A) In general.--The term `covered packer' means a packer 
     that is required under this subtitle to report to the 
     Secretary each reporting day information on the price and 
     quantity of livestock purchased by the packer.
       ``(B) Exclusion.--The term `covered packer' does not 
     include a packer that owns only 1 livestock processing plant.
       ``(3) Nonaffiliated producer.--The term `nonaffiliated 
     producer' means a producer of livestock--
       ``(A) that sells livestock to a packer;
       ``(B) that has less than 1 percent equity interest in the 
     packer and the packer has less than 1 percent equity interest 
     in the producer;
       ``(C) that has no officers, directors, employees or owners 
     that are officers, directors, employees or owners of the 
     packer;
       ``(D) that has no fiduciary responsibility to the packer; 
     and
       ``(E) in which the packer has no equity interest.
       ``(4) Spot market sale.--The term `spot market sale' means 
     an agreement for the purchase and sale of livestock by a 
     packer from a producer in which--
       ``(A) the agreement specifies a firm base price that may be 
     equated with a fixed dollar amount on the day the agreement 
     is entered into;
       ``(B) the livestock are slaughtered not more than 7 days 
     after the date of the agreement;
       ``(C) a reasonable competitive bidding opportunity existed 
     on the date the agreement was entered into;
       ``(5) Reasonable competitive bidding opportunity.--The term 
     `reasonable competitive bidding opportunity' means that
       ``(A) no written or oral agreement precludes the producer 
     from soliciting or receiving bids from other packers; and
       ``(B) no circumstances, custom or practice exist that 
     establishes the existence of an implied contract, as defined 
     by the Uniform Commercial Code, and precludes the producer 
     from soliciting or receiving bids from other packers.
       ``(b) General Rule.--Of the quantity of livestock that is 
     slaughtered by a covered packer during each reporting day in 
     each plant, the covered packer shall slaughter not less than 
     the applicable percentage specified in subsection (c) of the 
     quantity through spot market sales from nonaffiliated 
     producers.
       ``(c) Applicable Percentages.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     applicable percentage shall be:
       ``(A) 25 percent for covered packers that are not 
     cooperative associations of producers; and
       ``(B) 12.5 percent for covered packers that are cooperative 
     associations of producers.
       ``(2) Exceptions.--
       ``(A) In the case of covered packers that reported more 
     than 75 percent captive supply cattle in their 2001 annual 
     report to Grain Inspection, Packers and Stockyards 
     Administration of the United States Department of 
     Agriculture, the applicable percentage shall be the greater 
     of:
       ``(i) the difference between the percentage of captive 
     supply so reported and 100; and
       ``(ii) the following numbers (applicable percentages):
       ``(a) during each of the calendar years of 2004 and 2005, 5 
     percent;
       ``(b) during each of the calendar years of 2006 and 2007, 
     15 percent; and
       ``(c) during the calendar year 2008 and each calendar year 
     thereafter, 25 percent.
       ``(B) In the case of covered packers that are cooperative 
     associations of producers and

[[Page S7938]]

     that reported more than 87.5 percent captive supply cattle in 
     their 2001 annual report to Grain Inspection, Packers and 
     Stockyards Administration of the United States Department of 
     Agriculture, the applicable percentage shall be the greater 
     of:
       ``(iii) the difference between the percentage of captive 
     supply so reported and 100; and
       ``(iv) the following numbers (applicable percentages):
       ``(a) during each of the calendar years of 2004 and 2005, 5 
     percent;
       ``(b) during each of the calendar years of 2006 and 2007, 
     7.5 percent; and
       ``(c) during the calendar year 2008 and each calendar year 
     thereafter, 12.5 percent.
       ``(d) Nonpreemption.--Notwithstanding section 259, this 
     section does not preempt any requirement of a State or 
     political subdivision of a State that requires a covered 
     packer to purchase on the spot market a greater percentage of 
     the livestock purchased by the covered packer than is 
     required under this section.''
       ``(e) Nothing in this section shall affect the 
     interpretation of any other provision of this Act, including 
     but not limited to section 202 (7 U.S.C. Sec. 192).''.
                                 ______