[Congressional Record Volume 149, Number 22 (Thursday, February 6, 2003)]
[Senate]
[Pages S2052-S2053]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Feingold):
  S. 325. 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, during the last Congress Senator 
Feingold and I sponsored the Transparency for Independent Livestock 
Producers Act, or what we have generally referred to as the 
``Transparency Act''. Today we are once again working together in a 
bipartisan fashion to re-introduce this important legislation.
  As everyone knows, I introduced the packer ban this Congress 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 sponsorship of the packer ban is based on 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.
  This bipartisan legislation would guarantee that independent 
producers have a share in the market place 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.
  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.
  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. The 
Transparency Act is crucial legislation to guarantee livestock 
producers receive a fair shake at the farm gate and I am looking 
forward to working on this legislation in a bipartisan fashion.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 325

       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, which 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.--
       ``(A) In general.--The term `spot market sale' means a 
     purchase and sale of livestock by a packer from a producer--
       ``(i) under an agreement that specifies a firm base price 
     that may be equated with a fixed dollar amount on the date 
     the agreement is entered into;
       ``(ii) under which the livestock are slaughtered not more 
     than 7 days after the date on which the agreement is entered 
     into; and
       ``(iii) under circumstances in which a reasonable 
     competitive bidding opportunity exists on the date on which 
     the agreement is entered into.
       ``(B) Reasonable competitive bidding opportunity.--For the 
     purposes of subparagraph (A)(iii), circumstances in which a 
     reasonable competitive bidding opportunity shall be 
     considered to exist if--
       ``(i) no written or oral agreement precludes the producer 
     from soliciting or receiving bids from other packers; and
       ``(ii) no circumstance, custom, or practice exists that--

       ``(I) establishes the existence of an implied contract (as 
     determined in accordance with the Uniform Commercial Code); 
     and
       ``(II) 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.

[[Page S2053]]

       ``(c) Applicable Percentages.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     applicable percentage shall be--
       ``(A) in the case of a covered packer that is not a 
     cooperative association, 25 percent; and
       ``(B) in the case of a covered packer that is a cooperative 
     association, 12.5 percent.
       ``(2) Exceptions.--
       ``(A) Covered packers with a high percentage of captive 
     supply cattle.--In the case of a covered packer (other than a 
     covered packer described in subparagraph (B)) that reported 
     to the Secretary in the 2001 annual report that more than 75 
     percent of the cattle of the covered packer were captive 
     supply cattle, the applicable percentage shall be the greater 
     of--
       ``(i) the difference between the percentage of captive 
     supply so reported and 100 percent; and
       ``(ii)(I) during each of calendar years 2004 and 2005, 5 
     percent;
       ``(II) during each of calendar years 2006 and 2007, 15 
     percent; and
       ``(III) during calendar year 2008 and each calendar year 
     thereafter, 25 percent.
       ``(B) Cooperative associations with high percentage of 
     captive supply cattle.--In the case of a covered packer that 
     is a cooperative association and that reported to the 
     Secretary in the 2001 annual report that more than 87.5 
     percent of the cattle of the covered packer were captive 
     supply cattle, the applicable percentage shall be the greater 
     of--
       ``(i) the difference between the percentage of captive 
     supply so reported and 100 percent; and
       ``(ii)(I) during each of calendar years of 2004 and 2005, 5 
     percent;
       ``(II) during each of calendar years of 2006 and 2007, 7.5 
     percent; and
       ``(III) during 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) Relationship to Other Provisions.--Nothing in this 
     section affects the interpretation of any other provision of 
     this Act, including section 202.''.
                                 ______