[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
HEARING TO REVIEW THE STATE OF THE LIVESTOCK INDUSTRY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
LIVESTOCK, RURAL DEVELOPMENT, AND CREDIT
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
APRIL 30, 2014
__________
Serial No. 113-13
Printed for the use of the Committee on Agriculture
agriculture.house.gov
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COMMITTEE ON AGRICULTURE
FRANK D. LUCAS, Oklahoma, Chairman
BOB GOODLATTE, Virginia, COLLIN C. PETERSON, Minnesota,
Vice Chairman Ranking Minority Member
STEVE KING, Iowa MIKE McINTYRE, North Carolina
RANDY NEUGEBAUER, Texas DAVID SCOTT, Georgia
MIKE ROGERS, Alabama JIM COSTA, California
K. MICHAEL CONAWAY, Texas TIMOTHY J. WALZ, Minnesota
GLENN THOMPSON, Pennsylvania KURT SCHRADER, Oregon
BOB GIBBS, Ohio MARCIA L. FUDGE, Ohio
AUSTIN SCOTT, Georgia JAMES P. McGOVERN, Massachusetts
SCOTT R. TIPTON, Colorado SUZAN K. DelBENE, Washington
ERIC A. ``RICK'' CRAWFORD, Arkansas GLORIA NEGRETE McLEOD, California
SCOTT DesJARLAIS, Tennessee FILEMON VELA, Texas
CHRISTOPHER P. GIBSON, New York MICHELLE LUJAN GRISHAM, New Mexico
VICKY HARTZLER, Missouri ANN M. KUSTER, New Hampshire
REID J. RIBBLE, Wisconsin RICHARD M. NOLAN, Minnesota
KRISTI L. NOEM, South Dakota PETE P. GALLEGO, Texas
DAN BENISHEK, Michigan WILLIAM L. ENYART, Illinois
JEFF DENHAM, California JUAN VARGAS, California
STEPHEN LEE FINCHER, Tennessee CHERI BUSTOS, Illinois
DOUG LaMALFA, California SEAN PATRICK MALONEY, New York
RICHARD HUDSON, North Carolina JOE COURTNEY, Connecticut
RODNEY DAVIS, Illinois JOHN GARAMENDI, California
CHRIS COLLINS, New York
TED S. YOHO, Florida
VANCE M. McALLISTER, Louisiana
______
Nicole Scott, Staff Director
Kevin J. Kramp, Chief Counsel
Tamara Hinton, Communications Director
Robert L. Larew, Minority Staff Director
______
Subcommittee on Livestock, Rural Development, and Credit
ERIC A. ``RICK'' CRAWFORD, Arkansas, Chairman
BOB GOODLATTE, Virginia JIM COSTA, California, Ranking
STEVE KING, Iowa Minority Member
RANDY NEUGEBAUER, Texas MIKE McINTYRE, North Carolina
MIKE ROGERS, Alabama DAVID SCOTT, Georgia
K. MICHAEL CONAWAY, Texas FILEMON VELA, Texas
GLENN THOMPSON, Pennsylvania MICHELLE LUJAN GRISHAM, New Mexico
SCOTT DesJARLAIS, Tennessee PETE P. GALLEGO, Texas
CHRISTOPHER P. GIBSON, New York WILLIAM L. ENYART, Illinois
REID J. RIBBLE, Wisconsin CHERI BUSTOS, Illinois
JEFF DENHAM, California KURT SCHRADER, Oregon
RICHARD HUDSON, North Carolina RICHARD M. NOLAN, Minnesota
TED S. YOHO, Florida JOE COURTNEY, Connecticut
(ii)
C O N T E N T S
----------
Page
Costa, Hon. Jim, a Representative in Congress from California,
opening statement.............................................. 3
Crawford, Hon. Eric A. ``Rick'', a Representative in Congress
from Arkansas, opening statement............................... 1
Prepared statement........................................... 2
Ribble, Hon. Reid J., a Representative in Congress from
Wisconsin, submitted fact sheet................................ 105
Witnesses
Glauber, Ph.D., Joseph, Chief Economist, U.S. Department of
Agriculture, Washington, D.C................................... 5
Prepared statement........................................... 7
Supplementary material....................................... 106
Submitted questions.......................................... 110
Johnson, Roger, President, National Farmers Union, Washington,
D.C............................................................ 45
Prepared statement........................................... 47
Miller, Shane, Senior Vice President, Pork Margin Management,
Tyson Fresh Meats, Dakota Dunes, SD............................ 60
Prepared statement........................................... 61
Hill, D.V.M., Howard, President, National Pork Producers Council,
Cambridge, IA.................................................. 64
Prepared statement........................................... 66
Smith, Michael T., Special Projects Manager, Harris Ranch, Selma,
CA; on behalf of National Cattlemen's Beef Association......... 72
Prepared statement........................................... 73
Supplementary material....................................... 107
Roenigk, William ``Bill'' P., Senior Vice President and
Economist, National Chicken Council, Washington, D.C........... 76
Prepared statement........................................... 78
Krebs, Clint, President, American Sheep Industry Association,
Ione, OR....................................................... 84
Prepared statement........................................... 86
Submitted letter............................................. 108
Cook, Matthew T., President and Chief Executive Officer, Norbest,
Inc., Moroni, UT; on behalf of National Turkey Federation...... 89
Prepared statement........................................... 90
HEARING TO REVIEW THE STATE OF THE LIVESTOCK INDUSTRY
----------
WEDNESDAY, APRIL 30, 2014
House of Representatives,
Subcommittee on Livestock, Rural Development, and Credit,
Committee on Agriculture,
Washington, D.C.
The Subcommittee met, pursuant to call, at 10 a.m., in Room
1300, Longworth House Office Building, Hon. Eric A. ``Rick''
Crawford [Chairman of the Subcommittee] presiding.
Members present: Representatives Crawford, King,
Neugebauer, Conaway, Yoho, Costa, Scott, Lujan Grisham, and
Gallego.
Staff present: Caleb Crosswhite, Debbie Smith, John
Goldberg, Josh Mathis, Nicole Scott, Patricia Straughn, Pete
Thomson, Tamara Hinton, John Konya, Liz Friedlander, Mary
Knigge, and Riley Pagett.
OPENING STATEMENT OF HON. ERIC A. ``RICK'' CRAWFORD, A
REPRESENTATIVE IN CONGRESS FROM ARKANSAS
The Chairman. This hearing of the Subcommittee on
Livestock, Rural Development, and Credit to review the state of
the livestock industry, will come to order. I would like to
thank the Ranking Member of the Livestock, Rural Development,
and Credit Subcommittee, Mr. Costa, for working with me to put
together this hearing to examine the state of the livestock
sector.
Now that the farm bill is behind us, it is an important and
worthwhile task to take an inventory of the many and varied
challenges currently faced by the livestock community. This
will provide a framework for assessing priorities, going
forward. For this purpose, we have an excellent set of
witnesses, from the esteemed Chief Economist of the U.S.
Department of Agriculture serving as our first panel, to an
array of experts representing the elements of animal
agriculture testifying on our second panel.
A hearing with as broad a topic as this one means there
will be a considerable amount of ground to cover. I am looking
forward to our witnesses' testimony and their responses to the
questions from Members of the Subcommittee on topics both old
and new. While I anticipate we will hear about ongoing issues
such as the GIPSA rule and the mandatory Country-of-Origin
Labeling, I am also expecting to learn more about emerging
concerns, such as PEDv and the Administration's development of
new dietary guidelines.
As we begin, I want to take a moment to echo the prepared
remarks of Chairman Lucas at the beginning of our recent full
Committee hearing where we hosted the Secretary of Agriculture.
He said the farm bill was quite an achievement, and it contains
a good deal of fine public policy that will be welcomed by our
constituents, but there were disappointments as well in terms
of delivering much-needed regulatory relief to the agriculture
community.
The Ranking Member and I both remain especially concerned
with the ongoing burdens associated with the mandatory Country-
of-Origin Labeling law. This ill-conceived law has created
economic disruption in the livestock industry and set the stage
for a potential $2 billion in trade retaliation as a result of
the WTO dispute with two of our most important trading
partners, Canada and Mexico.
I expect we will be hearing from a number of our witnesses
about this topic today and in the near future, especially as
the case in the U.S. Court of Appeals proceeds next month and
when the WTO compliance panel issues its ruling as early as the
following month.
Again, I want to thank Ranking Member Costa for his
assistance in putting this hearing together, and we welcome our
witnesses.
[The prepared statement of Mr. Crawford follows:]
Prepared Statement of Hon. Eric A. ``Rick'' Crawford, a Representative
in Congress from Arkansas
I would like to thank the Ranking Member of the Livestock, Rural
Development, and Credit Subcommittee, Mr. Costa, for working with me to
put together this hearing to examine the state of the livestock sector.
Now that the farm bill is behind us, it is an important and
worthwhile task to take an inventory of the many and varied challenges
currently faced by the livestock community. This will provide a
framework for assessing priorities, going forward.
For this purpose, we have an excellent set of witnesses, from the
esteemed Chief Economist of the U.S. Department of Agriculture serving
as our first panel, to an array of experts representing the elements of
animal agriculture testifying on our second panel.
A hearing with as broad a topic as this one means there will be a
considerable amount of ground to cover. I am looking forward to our
witnesses' testimony and their responses to the questions from Members
of the Subcommittee on topics both old and new. While I anticipate we
will hear about ongoing issues, such as the GIPSA rule and mandatory
Country-of-Origin Labeling, I am also expecting to learn more about
emerging concerns such as PEDv and the Administration's development of
new dietary guidelines.
As we begin, I would like to take a moment to echo the prepared
remarks of Chairman Lucas at the beginning of our recent full Committee
hearing, where we hosted the Secretary of Agriculture.
The farm bill was quite an achievement; it contains a good deal of
fine public policy that will be welcomed by our constituents. But there
were disappointments as well, in terms of delivering much-needed
regulatory relief for the agriculture community. The Ranking Member and
I both remain especially concerned with the ongoing burdens associated
with the mandatory Country-of-Origin Labeling law. This ill-conceived
law has created economic disruption in the livestock industry and set
the stage for a potential $2 billion in retaliation as a result of a
WTO dispute with two of our most important trading partners, Canada and
Mexico.
I expect we will be hearing from a number of our witnesses about
this topic today, and in the near future, especially as the case in the
U.S. Court of Appeals proceeds next month and when the WTO compliance
panel issues its ruling as early as the following month.
Again, I would like to thank Ranking Member Costa for his
assistance in putting this hearing together and to welcome our
witnesses.
The Chairman. I would like to recognize Mr. Costa for his
opening statement.
OPENING STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN
CONGRESS FROM CALIFORNIA
Mr. Costa. Thank you very much, Mr. Chairman, for holding
this timely hearing. Our Subcommittee obviously has an
important responsibility as it relates to providing oversight
for livestock, rural development, and credit for agriculture
throughout the country. Obviously the issues facing America's
livestock industry, the feedstock that provides the cleanest,
safest food anywhere in the world for America's consumers, is a
critical element of America's agricultural productivity. We are
here to address a number of those issues facing the livestock
industry.
America's ranchers and meat processors are facing
challenges with their ability to continue to provide this
incredible product that they produce. Of particular concern, of
course, is loosening, as you indicated, Mr. Chairman, the
burdens and regulatory policies and proposals which are,
notwithstanding well intended, a hindrance to America's
ranchers and processors to comply with.
In California, as many of you know, we have one of the most
aggravated drought conditions that our state has faced, and our
processors and our producers are staggering under the impacts
of this drought, and while they are always happening and will
be a number of competing demands to our state's water system,
clearly, like in the course of the subject we are going to be
hearing this morning, regulatory actions have been taken that
make a bad situation worse, in my opinion.
During the 2009 drought, we had 30 to 40 percent
unemployment in many of the areas that I represent in the San
Joaquin Valley, but our businesses that help support our
agriculture economy were devastated then, and they are being
impacted today. However, this drought is not just about
California's economy and the families that work in the fields,
it is about a crisis that will touch every Californian, and it
will touch the American consumer at their dinner table because
of increased cost to the consumer.
We can't change the weather, of course, and I wish we could
take some of this rain here today and move it to California,
but we can change course and make a more friendly regulatory
environment. As you noted, there are a number of areas that I
would like to touch upon beyond MCOOL and beyond GIPSA. Our RFS
standards have increased the cost of feedstock in every area.
It has had an impact, notwithstanding good intentions, for
Renewable Fuel Standard. It has increased the cost of feed not
only to the beef industry, to the poultry industry, and to the
pork industry. And while ethanol is not the only factor in
increasing feedstock costs, it should be noted.
Before the RFS standards, Renewable Fuel Standard, were
implemented, 12\1/2\ percent of the corn in America was used to
produce ethanol. Today over 40 percent of the corn produced in
America is used to produce ethanol. In my opinion, this is
price distorting as it relates to the impacts and the cost of
that.
The Grain Inspection, Packers and Stockyards
Administration, otherwise known as GIPSA--that is a mouthful--
is an issue that you and I share a lot in common. We have been
fighting the proposed GIPSA rule since it was originally in the
2008 Farm Bill, and I find it, frankly, very frustrating that
notwithstanding Congress' will, we continue to have the agency
attempting to proceed with a rulemaking that clearly the
Congress has indicated a different opinion on. Congressman
Conaway and I and others have been working on this, as you
have, Mr. Chairman Crawford. The rulemaking process resulted in
proposals that would have fundamentally and negatively changed
the way livestock and poultry is marketed in this country by
taking a very valuable tool, and that is value-added marketing.
When you talk about value-added, it is what producers in
America do to make products more productive, products more
easily to prepare for the family dinner table. Its value-added
makes them more nutritious, and to take away from that ability
to provide value-added is inappropriate.
Congressman Conaway and I have offered amendments that
mirror the language of action taken by the Congress in
appropriations bill, and it was signed by the President, I
would indicate, four times. So this GIPSA-fix language was
intended to put this issue to rest and allow the livestock and
poultry industry to market their animals however they want,
when they want to, and where they want to without GIPSA
dictating the transactions. We need to ensure that the
livestock and poultry producers can take advantage of value-
added marketing opportunities in order to satisfy customers and
remain profitable.
Finally, the MCOOL, mandatory government-run Country-of-
Origin Labeling, has failed, period, in my opinion. Consumers
are not factoring it into their meat purchasing decisions, and
producers are not getting any return for their premium as a
result of it. What we have seen is increased cost to ranchers
and processors in order to comply with these regulations, and
it is impacting the industry. This program has added nothing,
in my view, but cost to the industry, and to be totally honest,
we don't know what the actual costs of the industry are because
a formal economic impact study has never been done.
Furthermore--and this is where I am very concerned because
I spent a great deal of my time focusing on increasing trade
opportunities between the United States and Asia, the United
States and Europe, and this is threatening our trade
relationship between two of our biggest markets in North
America, and that is Canada and Mexico. Currently our exports
of beef, pork, and chicken are immensely huge to those two
markets.
I think many of us assume that the World Trade Organization
will rule against the United States, and we will face harsh
retaliation efforts. No one wants to see retaliation efforts
taken by Canada or Mexico. We have the data, the studies, and
the WTO experience to show that it is time that we fix MCOOL,
this mandatory labeling.
This hearing could not come at a better opportunity, Mr.
Chairman, to show how we can fix the devastating impacts that
mandatory labeling will have on the markets and our businesses
to ranchers and processors throughout the country. We want to
see this problem solved, and we need to work together to make
that happen.
I drafted legislation that I will be introducing, would be
interested in having all the Members of the Subcommittee as
cosponsors of the bill. And, again, in closing, I want to thank
you for the countless efforts that you are making, the stories
that our livestock industry, our poultry producers, and
dairymen across the nation and in California are dealing with
to struggle to make a profit at the bottom line.
Again, this hearing could not have taken place at a better
time, and I look forward to hearing the witnesses' testimony,
and I yield back the balance of my time.
I thank the Ranking Member and echo his sentiments, and I
just want to say the chair will request that other Members
submit their statements for the record so the witnesses may
begin their testimony to ensure that there is ample time for
questions. Without objection, so ordered.
Right now I would like to introduce our first panel. We are
honored to have Dr. Joseph Glauber, Chief Economist at the
United States Department of Agriculture here in Washington,
D.C., join us today, and with that, Dr. Glauber, you are
recognized. Begin when you are ready.
STATEMENT OF JOSEPH GLAUBER, Ph.D., CHIEF ECONOMIST, U.S.
DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.
Dr. Glauber. Chairman Crawford, Ranking Member Costa, and
Members of the Subcommittee, thank you for the opportunity to
testify today on the state of the livestock and poultry
sectors. While the state of the broad U.S. agricultural economy
has been strong these past several years, the livestock sector
has not shared in the boom experienced by many crop producers.
On April 15th, the U.S. Bureau of Labor Statistics reported
that the Consumer Price Index for beef and veal prices in March
was 7.4 percent higher than year-ago levels. The CPI for pork
was also up 5.3 above year-ago levels, while chicken prices
were up almost four percent.
While hog and cattle prices have been at or near record
levels so far in 2014, these prices reflect tight supply due in
part to tight margins the last several years, but also to
drought--due to drought in the Southern Plains, in California,
and the outbreak of PEDv among swine herds, which will continue
to influence the ability of producers to benefit from and
respond to these higher prices.
Record prices for grains and oilseeds have kept feed costs
high and operating margins tight for most animal producers for
much of the past 5 years. Tight margins in turn have
constrained expansion, which has led to record high prices for
cattle and hogs and near-record prices for broilers. With
falling grain and oilseed prices following record global crops
of grain and oilseeds, the livestock sector would normally be
poised to take advantage of strong livestock prices and
moderating feed costs in 2014; however, the ability of the beef
and pork sectors to expand production will be limited by non-
feed cost factors.
We expect that red meat production will remain constrained
in the near term and is forecast in 2014 to be the lowest since
2010 and 1.8 percent below the 2008 record level. Prospects for
the beef sector in the near term are limited by the decline in
the cattle inventory, the biological lags inherent in the
production system, and persistent dryness in the Southern
Plains now in its 4th consecutive year of drought.
Likewise, in the hog sector, positive producer returns and
lower feed costs have set the stage for strong expansion;
however, the spread of Porcine Epidemic Diarrhea virus, PEDv,
through the U.S. herd is expected to sharply limit the supply
of hogs compared to earlier expectations.
In comparison to the beef and pork sectors, the poultry
industry is able to respond more quickly to market signals.
Broiler production is forecast to be at record levels in 2014,
up 1.8 percent over the previous record set last year. Egg
production will likely see record levels as well in 2014.
In my written testimony I discuss general trends in the
livestock and poultry sector before turning to a more extensive
review of the current situation and outlook for red meat,
poultry, and egg sectors, including recent movements in retail
prices, but in the time left this morning, let me address one
of the less contentious issues of the 2014 Farm Bill, the
livestock disaster provisions.
On April 14th, USDA published its final rule for
implementing the supplemental disaster programs from the new
farm bill. On April 15th, the Department began to sign up
producers for those four permanent disaster programs, three of
which cover livestock losses. Since that date over 13,000
producers have already visited FSA offices and started
applications for disaster programs.
Over $8.5 million in payments have already been approved
with about $4.5 million in payments already being transferred
to producers' banks. The programs are ultimately expected to
provide more than $2 billion in payments to producers for
eligible losses that have occurred since the expiration of the
livestock disaster assistance programs in 2011 for years 2012
and 2013, and continue to provide support--and will continue to
provide support to livestock producers in times of disaster
over the life of this farm bill.
In conclusion, following years of high feed costs and tight
margins, the outlook for livestock and poultry appears to be
improving, but significant challenges in the beef and pork
sector remain. Record high output prices and reduced prices for
grain and oilseeds are tempered by lingering drought and the
spread of PEDv. Production of red meat and turkey production is
forecast lower for 2014. Although broiler production is
forecast to increase, the gain will be insufficient to offset
the decline in other meats.
Livestock and poultry prices will be higher in 2014,
reflecting tight overall meat supplies and improving demand.
Eventually production of red meat, poultry, and eggs is
expected to increase when producers are able to take advantage
of more favorable margins to expand herds and flocks, and each
increased production will then moderate retail prices for red
meats, and poultry and eggs. How soon steer and hog prices
respond will depend on whether we see improvement in pasture
and forage conditions in the Southern Plains in the West and
the extent to which PEDv can be controlled through biosecurity
practices.
Despite global production records for most grains and
oilseeds in 2013, global grain and oilseed stocks remain tight
and--going into the 2014-2015 crop year. As such, feed costs
and livestock margins will remain vulnerable to potential
supply shocks throughout the year.
Mr. Chairman, that concludes my statement. I am certainly
happy to take--answer any questions.
[The prepared statement of Dr. Glauber follows:]
Prepared Statement of Joseph Glauber, Ph.D., Chief Economist, U.S.
Department of Agriculture, Washington, D.C.
Chairman Crawford, Ranking Member Costa, and Members of the
Subcommittee, thank you for the opportunity to testify today on the
state of the livestock and poultry sectors. While the state of the
broad U.S. agricultural economy has been strong these past several
years, the livestock sector has not shared in the boom experienced by
many crop producers. On April 15, the U.S. Bureau of Labor Statistics
(BLS) reported that the Consumer Price Index (CPI) for beef and veal
prices in March was 7.4 percent higher than year ago levels. The CPI
for pork was also up 5.3 percent above year ago levels while chicken
prices were up 3.6 percent. While hog and cattle prices have been at or
near record levels so far in 2014, these prices reflect tight supply
due in part to tight margins the last several years, but also drought
in the Southern Plains and California and the outbreak of PEDv among
swine herds, which will continue to influence the ability of producers
to benefit from and respond to these high prices.
Record prices for grains and oilseeds have kept feed costs high and
operating margins tight for most animal producers for much of the past
5 years. Tight margins, in turn, have constrained expansion which has
led to record high prices for cattle and hogs and near-record prices
for broilers. With falling grain and oilseed prices following record
global crops of grains and soybeans, the livestock sector would
normally be poised to take advantage of strong livestock prices and
moderating feed costs in 2014. However, the ability of the beef and
pork sectors to expand production will be limited by non-feed cost
factors. We expect that red meat production will remain constrained in
the near term and is forecast in 2014 to be the lowest since 2010 and
1.8 percent below the 2008 record (Figure 1). Prospects for the beef
sector, in the near term, are limited by the decline in cattle
inventory, the biological lags inherent in the production system and
persistent dryness in the Southern Plains, now in its fourth
consecutive year of drought. Likewise, in the hog sector, positive
producer returns and lower feed costs have set the stage for strong
expansion. However, the spread of Porcine Epidemic Diarrhea virus
(PEDv) through the U.S. herd is expected to sharply limit the supply of
hogs compared to earlier expectations. In comparison to the beef and
pork sectors, the poultry industry is able to respond more quickly to
market signals. Broiler production is forecast to be at record levels
in 2014, up 1.8 percent over the previous record set last year. Egg
production will likely see record levels as well in 2014.
In my testimony today I will first discuss general trends in the
livestock and poultry sector before turning to a more extensive review
of the current situation and outlook for the red meat, poultry and egg
sectors including recent movements in retail prices. Last, I will
discuss government safety net programs available for livestock
producers, including recently implemented disaster programs from the
Agricultural Act of 2014.
Trends in the Livestock and Poultry Sectors
While there are unique characteristics of the markets for red
meats, poultry and eggs, there are many common trends that have shaped
those markets in recent years.
1. For the past several years, feed costs have been high relative
to cash receipts for livestock, poultry and egg producers.
Since 2007, grain and oilseed prices spiked to record (nominal)
highs in 2007/08, 2010/11 and again in 2012/13, raising feed
costs and reducing operating margins. Feed costs as a percent
of total cash receipts average over 33 percent over 2007-13,
compared to less than 25 percent over 2000-06 (Figure 2).
2. High feed costs and poor pasture conditions reduced
profitability for livestock and poultry producers. Feed ratios
for hogs, cattle, broiler and layer operations declined sharply
in 2007 and remained at low levels up through mid-2013 (Figure
3). For cattle, low feed ratios have been exacerbated by poor
pasture conditions as a result of lingering drought in the
Southern Plains over the past 3 years. Poor margins over that
period limited expansion for hogs and broilers and contributed
to further contraction in the cattle sector. While feed costs
have moderated, other factors have hampered expansion plans in
the beef and pork sector.
3. Since 2007, lower meat production and increased net exports have
resulted in higher consumer prices and lower per capita
consumption in the United States. Annual average consumption of
red meats and poultry has declined from a peak of almost 222
pounds per capita in 2004 to less than 204 pounds in 2013
(Figure 4). The slowdown in the broader economy which began in
late 2007 also had a negative impact on per-capita consumption
and likely curtailed the ability to fully pass along higher
feed costs to consumers. With production forecast to increase
over 2014-23, per capita consumption of red meats and poultry
is forecast to increase but only reach 215 pounds by 2023. Most
of the gain in per capita meat consumption is expected to come
from growth in per capita poultry consumption, continuing the
rapid rise in poultry consumption that began in the mid-1970s.
Per-capita beef consumption is expected to continue to decline
in the near term through 2016 before showing modest growth with
the expected rebound in beef production once herds have
recovered. Per capita pork consumption is expected to rise
slightly as production recovers over the next 4 years before
flattening as production growth is projected to slow.
4. Consumption patterns for red meats poultry and eggs have changed
significantly over the past 40 years. Consumption of food
prepared away from home plays an increasingly large role in the
American diet. In 1970, 25.9 percent of all food spending was
on food away from home; by 2012, that share rose to its highest
level of 43.1 percent. A number of factors contributed to the
trend of increased dining out since the 1970s, including a
larger share of women employed outside the home, more two-
earner households, higher incomes, more affordable and
convenient fast food outlets, increased advertising and
promotion by large food-service chains, and the smaller size of
U.S. households.
Consumer surveys suggest that almost 40 percent of beef and 42
percent of chicken is consumed as food prepared away from home.
Ground beef eaten at restaurants, including the fast food
sector, accounted for 60 percent of the beef eaten away from
home.
5. Exports account for an increasing share of total demand for red
meats, poultry and eggs. Twenty-five years ago, exports of red
meats, poultry and eggs were negligible, accounting for less
than five percent of total production. Over the past 5 years,
exports have averaged almost ten percent of beef and veal
production, 20 percent of pork and chicken production, and
about \1/8\ of turkey production (Table 1). Exports have
brought additional value to U.S. producers and consumers,
particularly exports of cuts of meat that are less popular with
U.S. consumers such as chicken leg quarters and beef offal.
Trade in live animals is also important, particularly for cattle
and hogs. The United States imports both feeder and slaughter
cattle from Canada and Mexico and imports hogs, primarily
feeder pigs, mainly from Canada. Canadian feeder pigs have
represented upwards of 5-6 percent of finishing hogs in the
U.S., but have recently seen their share shrink considerably.
Table 1.--Share of Red Meat, Poultry and Egg Production That Is Exported
----------------------------------------------------------------------------------------------------------------
1970-79 1980-89 1990-99 2000-09 2010-14
----------------------------------------------------------------------------------------------------------------
(percent)
----------------------------------------------------------------------------------------------------------------
Beef and veal 0.4 1.9 6.8 6.6 9.7
Pork 1.4 1.3 4.2 12.4 21.5
Chicken 2.2 4.3 12.7 16.4 19.4
Turkey 2.3 1.4 6.2 9.2 12.5
Eggs * 0.8 2.1 2.9 2.6 3.9
----------------------------------------------------------------------------------------------------------------
Source: PSD database and ERS, includes farm production.
* Includes shell eggs and egg products.
6. Contracting is a major feature of livestock and poultry
production. Contracting is a major feature of U.S. agriculture
(MacDonald and Korb 2011) but can vary considerably by
livestock type. In 2008, agricultural contracts covered almost
90 percent of poultry and egg production, over \2/3\ of hog
production and almost 30 percent of cattle production (Table
2).
Contracts are evolving to cover new and often unforeseen
developments or changes in market conditions. Standard poultry
production contracts are designed so that the integrator
provides feed and chicks and technical advice, while the farm
operator provides the on-farm equipment, structures, labor, and
utilities. Hog production contracts largely follow suit. Today
more production contracts are specifying animal welfare and
health standards, while some provide for joint financing of
utility expenses. Production contracts are also evolving to
handle more complex organizational structures, including third
party (nongrower) ownership of housing. Cattle feedlots
typically charged clients a fee for providing custom feeding
and marketing services for the client's cattle, but some
feedlots now offer contracts that share equity ownership (of
the cattle) between the feedlot and the client.
Table 2.--Share of Commodity Production Under Contract, by Commodity
----------------------------------------------------------------------------------------------------------------
Commodity 1991-93 1996-97 2001-02 2005 2008
----------------------------------------------------------------------------------------------------------------
Share of production under contract (percent)
----------------------------------------------------------------------------------------------------------------
Livestock \1\ 32.8 44.9 48.2 50.1 52.8
Cattle N/A 17.2 21.0 17.6 29.4
Hogs N/A 34.2 62.5 76.2 68.1
Poultry and eggs 88.7 83.8 92.3 94.2 89.9
----------------------------------------------------------------------------------------------------------------
\1\ Includes dairy and all other livestock.
N/A = data not available for commodity detail.
Source: MacDonald and Korb 2011.
The Outlook for Cattle and Beef
USDA's January Cattle report estimated that the number of cattle
and calves on January 1, 2014 fell about two percent to 87.7 million
head, the lowest cattle and calf inventory since 1951 (Figure 5). The
cow herd was estimated at 38.3 million head, about one percent smaller
than a year earlier. Producers indicated that they intended to retain
two percent more heifers for addition to the beef herd and expected to
have one percent more heifers calve during 2014. Dairy cow numbers were
about equal with last year but producers indicated that while retaining
slightly fewer heifers for addition to the cow herd, they expected more
to calve this year than last. The 2013 calf crop was estimated at 33.9
million head, the smallest calf crop since 1949.
Both the U.S. cattle inventory and the beef cow herd are expected
to continue to shrink in 2014. Although returns to cow/calf operators
have improved, many producers appear to be taking a cautious view, and
are rebuilding their capital after a year or more of buying expensive
forage and ensuring sufficient supplies of forage and water will be
available before expanding in earnest. Moreover, persistent drought in
California and the Southern Plains will likely continue to put pressure
on cow/calf producers in those regions. Since the start of 2011, the
cattle and calves inventory has declined by almost five million head,
with almost 65 percent of those losses occurring in the drought-
affected States of Texas and Oklahoma.
USDA estimates that as of April 15, 2014, approximately 44 percent
of the domestic cattle inventory was within an area experiencing
drought (Figure 6). While the portion of the inventory currently in
drought is down significantly from September 2012 when over 75 percent
of the inventory was in areas experiencing drought, the amount of
inventory in drought has increased ten percentage points since last
fall and remains high relative to historical levels (Figure 7).
Commercial cow slaughter for first-quarter 2014 is forecast to be
the lowest since 2008 and is indicative of both low cow inventories and
intentions to retain or increase cow inventories as soon as pasture
conditions permit. If pasture conditions fail to develop normally, the
rate of cow slaughter could again increase and delay expansion. First-
quarter commercial steer and heifer slaughter is forecast at the lowest
level since 1965. First-quarter beef production will likely be the
lowest only since 1995 because dressed weights have increased over time
and have largely offset general declines in inventories and slaughter
since their peaks in the mid-1970s (Figure 8).
Weekly average processing beef prices continue to increase as
weekly federally inspected cow slaughter declines, year over year
(Figure 9). Cow/calf producers should continue to see attractive cow
prices for the near term because of low cow inventories and continued
demand for ground beef products made from culled cows. Choices for cow/
calf operators who are not entirely certain they want to deal with
another year of drought will be made more difficult by high cow prices.
Feeder cattle prices could decline slightly in the near future as
demand for pasture cattle subsides with stocking of available pasture.
However, the anticipated smallest calf crop since 1949 will provide
significant price support for the limited supplies of feeder cattle. At
the same time, fed cattle and beef prices may have reached their peak
for the season. For 2014, beef production is forecast at 24.6 billion
pounds, 4.5 percent below 2013. Steer and heifer slaughter will be
below 2013 as feedlot numbers dwindle. Strong prices and lower feed
prices have supported heavier slaughter weights as a short-run means to
increase beef output and carcass weights are forecast to increase to
almost 795 pounds.
Beef and cattle trade. Year to date U.S. cattle imports for 2014
totaled 364,804 head through February, about even with a year earlier.
Imports from Canada were up seven percent, while imports from Mexico
have fallen six percent. Imports of slaughter cattle from Canada were
unchanged from 2013, but feeder cattle imports have increased 19
percent this year. Demand from U.S. buyers has been strong as feeder
cattle prices in Canada have lagged strong growth in U.S. prices.
Agricultural Marketing Service weekly data through March 22, 2014 show
cattle imports are 17 percent above year earlier levels. Cattle imports
are forecast at 1.97 million head for 2014. This is a one percent
decline in cattle imports from 2013 as inventories have fallen in both
Canada and Mexico.
U.S. beef exports were up four percent through February 2014
compared to a year earlier. Strong demand from Japan, Mexico, and Hong
Kong more than offset declining shipments to Canada, South Korea, and
Taiwan. Higher prices for U.S. beef may have limited demand from some
markets, including Canada which has also experienced a depreciating
exchange rate with the U.S. dollar. Higher prices have not discouraged
strong sales in product to Japan and Hong Kong as the United States
continued to take market share from Australia. Exports to Mexico have
also been strong in 2014. After declining in 2012 due to a drought-
induced rise in Mexican beef production, U.S. exports to Mexico rose 15
percent in 2013 and were up 32 percent through February. Demand is
likely to remain strong as beef production is expected to fall this
year in Mexico due to diminished cattle inventories. The forecast for
2014 U.S. beef exports is 2.515 billion pounds, implying a nearly three
percent decline from 2013 as lower production will limit trade volumes.
Tight supplies of processing meat and continued strong demand for
hamburger will likely support increased imports of beef during 2014.
Imports are forecast at 2.3 billion pounds, about three percent above
2013. However, growth in imports, especially in the first half of the
year will be constrained by tight supplies in those countries
traditionally supplying the United States and strong demand in a number
of markets world-wide.
Hogs and Pork
While pork producers have also faced high feed prices over the last
several marketing years and hog prices have risen significantly in
recent weeks, tight supplies are less a result of cautious expansion
seen among cattle feeders and, more concretely, the impact of Porcine
Epidemic Diarrhea (PEDv). Much of the recent volatility in hog prices
can be attributed to changing market expectations about the impact of
the virus. From the earliest reported incidents in 2013, the virus has
spread to 30 U.S. states, four Canadian provinces and several areas in
Mexico (Figure 10).
The March 1 inventory of market hogs of just over 57 million head
was 3.7 percent lower than a year ago, the latest in a string of year-
over-year quarterly inventory contractions which began March-May 2013,
and the lowest March 1 inventory level since 2007. That lower inventory
number is largely a reflection of a smaller pig crop in the previous
two quarters. The September-November pig crop was fractionally lower
than a year earlier while the December-February pig crop came in at
27.3 million head, almost three percent lower than a year ago. The
December-February pig crop declined despite a 2.8 percent increase in
farrowings from year ago levels and reflected the negative impact of
PEDv on litter rates. The PEDv virus has proven particularly lethal to
young piglets, increasing pre-wean mortality which is captured in
reported reductions in litter rates, a measure of the number of pigs
weaned per farrowing. The litter size for the December-February pig
crop was 9.53 pigs per litter, down 5.5 percent compared to the same
period a year earlier (Figure 11). That represents the first year on
year decline in the litter rate since the June-August quarter of 2003
and the largest percent year-on-year decline since the December-
February period in 1977 (37 years ago) at a time when the litter rate
was much lower.
The lower litter rate indicates that the spread of PEDv may be
affecting hog numbers and future pork production. To compensate for
piglet losses, the industry has indicated plans to increase farrowings
and feeding animals to heavier weights. While feeder pig imports,
primarily from Canada, were up in the first quarter of 2014 compared to
the previous quarter, they were down year over year for the December-
February period and part of a broader decline in feeder pig trade which
saw feeder pig import numbers fall by over 13 percent in 2013. To date,
the spread of PEDv in Canada has not been as severe as in the United
States, with approximately 50 cases reported in four Canadian provinces
as of mid-April. Nonetheless, hog imports are forecast lower than last
year as supplies in Canada remain tight.
The reduced litter rates reflect average industry wide impacts but
ability to capitalize on higher hog prices and lower feed prices will
depend on the operations exposure to PEDv. Producers who have avoided
significant animal losses will be able to sell feeder pigs or finished
hogs into a tight market at high prices, however, those hardest hit by
PEDv will be left with little to sell. Given the tighter supply of
feeder pigs, finishing operations may bid away margins in order to
maintain finishing facilities at capacity. The last several weeks have
seen hog slaughter dip 5% compared to the same period last year and
moving forward, lower pig crops and gilt retention are likely to lead
to reduced hog slaughter numbers.
The slight increase in the March 1 inventory of breeding animals,
combined with aggressive year over year increases in farrowing
intentions for the spring and summer pig crops, suggest that producers
are responding to high hog prices and mitigating some of the PEDv
losses. Producers have indicated intentions to expand farrowings over
the next two quarters by two percent (Figure 12). In addition to
expanded farrowings, carcass weights are expected to average over 211
pounds dressed weight, two percent above last year. In the short run
this will offset some of the loss in pork production from lower market
hog numbers. As a result of the combination of lower litter rates,
reduced hog imports, increased farrowings and heavier carcass weights,
commercial pork production for 2014 is forecast to be 22.76 billion
pounds, down 1.8 percent from last year.
Live hog prices have risen dramatically since the first of the year
(Figure 13). U.S. hog prices, on a national base, 51-52% lean, live
equivalent, are forecast to average $72 to $75 per cwt for 2014, up
significantly from last year's $64.05. Prices are expected to peak in
the first or second quarter as the reduced December-February pig crop
comes to market and supplies are tightest.
If farrowings follow intentions, supplies in the second half of the
year should expand and moderate prices, but they are still likely to
average above year ago levels. The continuing impacts of PEDv remain a
significant uncertainty and will influence the price path in the coming
months.
Pork exports were lower in 2013 as Russia was closed due to
restrictions on the use of Ractopamine and exports to Japan were lower
as higher beef sales cut into pork exports, but they are expected to
slip further as high U.S. pork prices and limited supplies will
dissuade some foreign buyers. Pork exports are expected to fall three
percent to 4.85 million pounds. Pork imports are expected to show gains
as higher U.S. prices encourage imports.
In the coming decade, domestic pork production is expected to
overtake domestic beef production on a weight basis but a greater
proportion of the pork is destined for the export market as efficiency
gains in the sector are expected to enhance competitiveness overseas.
Asia and Mexico are likely to remain key markets for U.S. product while
the importance of Russian markets, in pork and other meats, may decline
as the country pursues a policy of greater meat self-sufficiency. With
expanding pork exports, per-capita pork consumption while growing, is
expected to remain third behind beef and poultry consumption in the
coming decade. The on-going impact of PEDv will continue to shape
market expectations in the near term and beyond and will continue to
shape market expectations.
Sheep and Lamb
While world sheep numbers have remained relatively stable over the
last several decades, the size of the U.S. flock has seen steady
declines. The U.S. sheep and lamb inventory is expected to decline for
a ninth straight year in 2014 (Figure 14) with a January 1, 2014
inventory of sheep and lambs of 5.21 million head, down two percent
from the previous year. While Colorado, California and Wyoming showed a
decline of 110,000 head, or an eight percent decline, Texas, the top
sheep producing state has been building inventory after drought related
losses in 2011. Texas inventory numbers were up 30,000 head in 2012 and
another 40,000 head in 2013.
The breeding flock likewise declined two percent and the number of
replacements lambs was almost four percent lower. The lamb crop
declined over two percent in 2013 as the lambing rate fell to 1.07
lambs per ewe per year. In 2013, commercial lamb and mutton production
was virtually unchanged from 2012 despite a smaller 2012 lamb crop, as
poor forge conditions and high feed costs encouraged producers to
advance marketings in mid-2013. Commercial lamb and mutton production
in 2014 is forecast at 150 million pounds, almost four percent lower,
as market lambs on January 1 were down over two percent and producers
may choose to hold back lambs to rebuild flocks. Continued or worsening
drought conditions could, however, negatively impact plans for ewe
retention.
Lamb imports, primarily from Australia and New Zealand, represent
about \1/2\ of available supplies and tend to move in concert with
domestic production. In 2014, the fall in imports may outpace the fall
in domestic production. Lamb and mutton imports for 2014 are forecast
at 160 million pounds, seven percent lower than 2013. Despite the lower
forecast for U.S. production, supplies in Australia and New Zealand
will be relatively tight. Competition for those supplies has also
increased with the expansion of sales in Asia and exports to the U.S.
are expected to be limited, supporting domestic lamb prices.
Per-capita lamb consumption is expected to continue its long-run
decline, with per-capita consumption expected to be 0.9 pounds in 2014,
less than \1/3\ the level in 1970. The decline is expected to continue,
although at a much slower pace, in the next decade. Population growth
will offset some of the decline in per-capita consumption with total
disappearance likely to be relatively flat in the coming years.
The San Angelo Choice slaughter lamb price is forecast to average
$157 to $165 per cwt for 2014, a sharp increase from $111.12 in 2013
and very close to 2011's record of $161. Prices began to increase in
the second half of 2013 and are expected to average above year-earlier
through 2014 as supplies of marketable lambs and lamb and mutton
imports remain tight, other meat prices remain elevated and demand
improves.
Broilers
The broiler industry has faced some of the same challenges the pork
and beef industry has faced since 2006. The sector has faced high feed
costs and a sluggish economy which weakened demand, but broiler meat
has benefited from a quicker response time, price increases in other
meats and continued strong export demand. Producers responded to higher
broiler prices in 2012 by beginning to increase production in late
2012. However, high feed prices in late 2012 and early 2013 kept the
expansion in check and producers appear to be taking a very measured
view toward expansion. In anticipation of moderating corn and soybean
meal prices for the 2013/14 marketing year and strong broiler prices
supported by record prices for competing meat products, the number of
broiler chicks placed in the second half of 2013 increased compared to
a year earlier. However, growth has slowed since the beginning of 2014.
Current projections show modest growth in bird numbers and increased
bird weights encouraged by low feed costs. As a consequence broiler
production is expected to be up almost two percent to 38.5 billion
pounds in 2014. Expectations are for longer run return to steady growth
in subsequent years.
Trade has been a major factor in the growth of the broiler industry
over the last 2 decades and the United States is expected to export 7.5
billion pounds of broiler meat in 2014, up from 7.4 billion pounds in
2013. The United States is the world's second largest broiler exporter
and U.S. exports have generally grown at or exceeded the rate of
production growth. Exports represented just under 20 percent of broiler
production in 2013, up from less than five percent prior to 1990.
Mexico is the largest destination for U.S. exports accounting for 19
percent in 2013 of U.S. exports, but Russia and Canada are also
significant destinations as well as Georgia, Angola and Cuba in recent
months.
The U.S. broiler industry has benefited from income and population
growth overseas as consumers in developing economies look for
increasing quantities of meat imports. Broiler meat has also benefited
from the complimentary nature of consumer demand in those countries.
Little of what is exported is whole chicken. While breast meat is in
high demand in the United States, for many of our export destinations,
leg meat is preferred and leg quarters have become the dominant broiler
product exported (Figure 15). The availability of a segmented market
has helped boost the overall value of the bird to producers.
Despite higher production, tight supplies of beef and pork and
improving economic conditions are likely to support stronger demand for
broiler meat putting upward pressure on retail prices. For 2014, the
National Composite Weighted Average Broiler price is forecast to
average a record $1.00-$1.04 per pound, compared with just under $1.00
in 2013.
Turkeys
Turkey production for 2014 is forecast to remain flat at just under
5.7 billion pounds, about two percent lower as the number of poults
placed remains below year-earlier. Since the second quarter of last
year, turkey production has been consistently below year-earlier levels
despite declining feed prices as weak turkey prices in the first half
of 2013 have likely delayed expansion plans. Eggs set in incubators
were below year-earlier through the fourth-quarter 2012 and into early
2014. With stronger whole turkey prices forecast for 2014 and moderate
feed costs, producers are expected to expand in the second half of
2014. A portion of the growth in production is likely to be the result
of heavier weight birds as producers take advantage of lower prices
feed. Turkey stocks at the end of February were 17 percent lower than a
year earlier with the largest decline in legs which fell 59 percent
boosting prices for legs but with more limited upward pressure on whole
bird prices. Year on year growth in inventories is expected in the
second half of 2014 as production lags.
The National turkey hen price is forecast to average $1.03-$1.08
per pound, compared to an average of $1.00 in 2013.
In 2013, turkey exports were five percent lower, largely on weaker
sales to most major markets. Turkey exports for 2014 are forecast to
decline about six percent to 710 million pounds as demand remains soft
and other poultry products are competitive as turkey prices rise.
Eggs
Egg production slipped in 2007 and 2008 as producers responded to
increasing feed costs and relatively weak egg prices. However, with
only modest increases in production, egg prices have steadily increased
in the past several years, supporting continued expansions despite high
feed prices. Total U.S. egg production in 2014 is expected to be 8.06
billion dozen, almost two percent higher than 2013
Table egg production is expected to increase about two percent to
6.97 billion dozen as producers respond to lower feed prices and higher
egg prices in the first half of 2014. On January 1, 2014 the number of
table egg layers was about two percent higher than year-ago. Table egg
layers have been above year-earlier since October 2011. Hatching egg
layers were also up over two percent compared to a year ago with
strength in both broiler-type and egg-type layers indicating expansion
breeding stock for both uses. Hatching egg production is expected to
increase about 2.5 percent in 2014 as broiler and table egg producers
look to expand bird numbers and increase production.
Annual per-capita consumption of eggs for is currently estimated at
255.1 eggs. Between 1945 and 1995, per-capita egg consumption decreased
about 44 percent, from over 400 eggs per person per year to 232 eggs.
Since then per capita egg consumption has risen by about ten percent.
Most of the growth in consumption has been in the form of eggs
processed in food products (Figure 16).
For 2014, New York wholesale egg prices are forecast to average
$1.26 to $1.32 per dozen, up from the $1.25 average for 2013. Prices
are expected to decline in the second half of the year as output
expands on hatching egg decisions made in the past several months.
In 2013, egg and egg product exports increased 23 percent to 372
million dozen, shell egg equivalent. The main driver of the increase
was exports to Mexico as an outbreak of highly pathogenic Avian
Influenza in Jalisco in mid-2012 reduced Mexican egg production and has
since limited Mexican egg availability as local production attempts to
rebuild. Higher sales to Japan and Canada also supported increased egg
exports. Looking forward to 2014, egg exports are forecast at 312
million dozen, down 16 percent as Mexico's production recovers and egg
prices strengthen.
Retail Prices
Consumer expenditures for meats, poultry and eggs account for
almost \1/5\ of total at-home food expenditures. While recent changes
in the Consumer Price Index (CPI) for food consumed at home have been
low relative to historical levels, high product prices for animal
products have resulted in larger increases in retail prices for meats,
poultry and eggs prices relative to other food items. Beef and veal
prices, which are already at or near record levels across the country,
rose 1.9 percent in March and are up 7.4 percent over March 2012
levels. Pork prices rose 1.9 percent in March and are up 5.3 percent
over year ago levels. Chicken prices in March were up 4.9 percent over
March 2013 levels while egg prices were up almost ten percent from a
year ago.
Table 3 shows annual inflation rates for various food categories
since 2010 as well as forecasts for 2014. Aggregate food at home prices
have, on average, risen by 2.1 percent annually since 2009. Over the
same period, meat prices rose by four percent annually with retail
prices for beef and veal increasing, on average, by 5.3 percent
annually. Between 2009 and 2013, pork, poultry and egg prices rose
annually by 3.6 percent, 3.2 percent and 4.2 percent, respectively.
With the exception of fish and seafood (3.2 percent annual increase),
dairy products (2.5 percent annual increase) and fats and oils (3.3
percent annual increase), most other food categories had annual
inflation rates less than two percent.
The Economic Research Service forecasts changes in the CPI for food
at home for 2014 to be in line with historical rates of inflation at
2.5 to 3.5 percent.
Table 3.--Annual Change in Consumer Price Index, Selected Categories, With Forecasts for 2014
----------------------------------------------------------------------------------------------------------------
Avg. Forecast
Weight 2010 2011 2012 2013 2010-13 2014
----------------------------------------------------------------------------------------------------------------
Food at home 100.0 0.3 4.8 2.5 0.9 2.1 2.5 to 3.5
Meats, poultry, and fish 21.4 1.9 7.4 3.6 2.1 3.7 2.5 to 3.5
Meats 13.8 2.8 8.8 3.4 1.2 4.0 2.5 to 3.5
Beef and Veal 6.6 2.9 10.2 6.4 2.0 5.3 3.0 to 4.0
Pork 4.2 4.7 8.5 0.3 0.9 3.6 2.0 to 3.0
Other meats 3.1 ^0.1 6.4 1.7 ^0.1 2.0 2.0 to 3.0
Poultry 4.1 ^0.1 2.9 5.5 4.7 3.2 3.0 to 4.0
Fish and seafood 3.5 1.1 7.1 2.4 2.5 3.2 2.5 to 3.5
Eggs 1.3 1.5 9.2 3.2 3.3 4.2 3.0 to 4.0
Dairy products 10.5 1.1 6.8 2.1 0.1 2.5 2.5 to 3.5
Fats and oils 3.1 ^0.3 9.3 6.1 ^1.4 3.3 1.5 to 2.5
Fruits and vegetables 15.0 0.2 4.1 ^0.6 2.5 1.5 2.5 to 3.5
Fresh fruits & veg 11.5 0.7 4.5 ^2.0 3.3 1.6 2.5 to 3.5
Fresh fruits 6.1 ^0.6 3.3 1.0 2.0 1.4 3.5 to 4.5
Fresh vegetables 5.4 2.0 5.6 ^5.1 4.7 1.7 2.0 to 3.0
Processed fruits & veg 3.5 ^1.3 2.9 3.8 0.3 1.4 2.5 to 3.5
Sugar and sweets 3.5 2.2 3.3 3.3 ^1.7 1.7 2.0 to 3.0
Cereals and bakery products 14.3 ^0.8 3.9 2.8 1.0 1.7 1.5 to 2.5
Nonalcoholic beverages 11.0 ^0.9 3.2 1.1 ^1.0 0.6 2.5 to 3.5
Other foods 19.9 ^0.5 2.3 3.5 0.5 1.5 2.0 to 3.0
----------------------------------------------------------------------------------------------------------------
Source: BLS and ERS.
Safety Net for Livestock Producers
USDA offers several types of programs to assist livestock producers
manage and recover from events that adversely affect their production.
Many livestock producers are also crop producers and so the discussion
here is limited to programs that are specific to livestock production.
The two main types of programs that are directly targeted to livestock
production are insurance products and supplemental disaster assistance.
Insurance programs. USDA's Risk Management Agency offers several
products that are tailored to livestock production: livestock gross
margin policies (LGM), livestock risk protection policies (LRP), and
several policies to guard against adverse weather affecting on-farm
forage production. LGM and LRP are livestock pilot programs and are
limited by the Federal Crop Insurance Act to total annual outlays for
all livestock programs of $20 million per fiscal year. The bulk of the
monies available to those pilots are used in the LGM-Dairy program.
Pastureland, rangeland, and forage losses can be insured under
individual or area-based forage policies or under the index-based
Pasture Rangeland and Forage (PRF) policy based on a rainfall or
vegetative index. The PRF-Rainfall Index (PRF-RI) is based on weather
data collected and maintained by NOAA's Climate Prediction Center. The
index reflects how much precipitation is received relative to the long-
term average for a specified area and timeframe. The PRF-Vegetative
Index (PRF-VI) is based on the U.S. Geological Survey's Earth Resources
Observation and Science (EROS) normalized difference vegetation index
(NDVI) data derived from satellites observing long-term changes in
greenness of vegetation of the Earth since 1989.
In 2013, forage and forage seeding policies covered almost 3.5
million acres with crop value of $631 million; and rainfall and
vegetative PRF programs covered 54 million acres with an insured crop
value of nearly $1 billion. In total producers paid about $110 million
in premiums for those policies in 2013, which covered approximately
$200 million in losses.
In addition, mechanically harvested or grazed forage production can
be covered under the noninsured crop disaster assistance program (NAP),
which covers the up to 50 percent of losses. NAP payments were $225
million in 2013.
Livestock disaster assistance. On April 14, 2014, USDA published
its final rule implementing the supplemental disaster programs from the
new farm bill. On April 15, the department began to sign-up producers
for those four permanent disaster programs. Three--the Livestock Forage
Disaster Program (LFP), the Livestock Indemnity Program (LIP), and the
Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish
Program (ELAP), cover certain livestock losses.
Those programs were previously authorized through September 30,
2011 under the 2008 Farm Bill (the Food, Conservation, and Energy Act
of 2008, Pub. L. 110-246). With the authorization provided in the 2014
Farm Bill, those disaster assistance programs are permanent, continuing
programs that are not subject to annual appropriations. They are
expected to provide more than $2 billion in payments to producers for
eligible losses that have occurred since the expiration of the
livestock disaster assistance programs in 2011 for years 2012 and 2013
(Table 4). Within the first week of signup, $9.4 million in LFP
payments had been requested or were awaiting certification, and more
than $4 million had been disbursed. Overall payments from 2012 to 2023
are forecast to be about $6 billion (of which about 85 percent is for
Livestock Forage Disaster Program payments).
LFP provides payments to eligible livestock producers that have
suffered livestock grazing losses due to qualifying drought or fire. An
eligible livestock producer must own, cash lease, or be a contract
grower of eligible livestock during the 60 calendar days before the
beginning date of the qualifying drought or fire in a county that is
rated by the U.S. Drought Monitor as D2, D3, or D4. LFP payments are
forecast to be approximately $5 billion from 2012-2023.
LIP provides disaster assistance to livestock owners and contract
growers that have incurred livestock death losses in excess of normal
mortality due to adverse weather (including hurricanes, floods,
blizzards, disease, wildfires, extreme heat, and extreme cold) during
the calendar year. LIP also provides assistance to livestock owners and
contract growers that had losses due to livestock deaths in excess of
normal mortality due to attacks by animals reintroduced into the wild
by the Federal Government or protected by Federal law, including wolves
and avian predators. Eligible livestock includes beef cattle, dairy
cattle, bison, poultry, sheep, swine, horses, and other livestock as
determined by the Secretary. LIP payments are forecast to be $700
million from 2012-2023.
ELAP provides emergency assistance to eligible producers of
livestock, honeybees, and farm-raised fish that have losses due to
adverse weather, or other conditions, that are not covered under LFP or
LIP. ELAP payments are forecast to be about $150 million from 2012-
2023. ELAP payments are capped by the 2014 Farm Bill at $20 million
annually.
To expedite applications, information on the types of records
necessary can be provided by local FSA county offices. Note that the
final rule provides producers with greater flexibility as to their
documentation. For example, for ELAP, if verifiable or reliable records
are not available, FSA may now accept producers' certification of
eligible losses if similar producers have comparable eligible losses,
as determined by FSA. The final rule does not, however, change the
requirement that participants receiving ELAP, LFP, and LIP payments
must keep documentation supporting the request for payment for 3 years
following the end of the year in which the application for payment was
filed. That record-keeping requirement is consistent with other FSA
rules and programs, as well as with previous similar disaster
assistance programs. County offices can schedule appointment times for
sign-up.
Table 4.--Estimated Outlays for FSA Livestock Disaster Programs
(Millions)
------------------------------------------------------------------------
Retroactive
Program Average FY 2008- Payments FY 2012- Forecast FY
11 13 estimate 2012-23
------------------------------------------------------------------------
ELAP $11.3 $20.9 $154
LIP $42.9 $98.4 $728
LFP $443.0 $2,218 $5,061
-----------------------------------------------------
Total........... $497.2 $2,337 $5,943
------------------------------------------------------------------------
Source: Regulatory Impact Assessment associated with the Farm Service
Agency Final Rule. http://www.regulations.gov/
#!documentDetail;D=CCC_FRDOC_0001-0253.
Conclusions
Following years of high feed costs and tight margins, the outlook
for livestock and poultry appears to be improving but significant
challenges in the beef and pork sector remain. Record high output
prices and reduced prices for grains and oilseeds are tempered by
lingering drought and the spread of PEDv. Production of red meat and
turkey production is forecast lower for 2014. Although broiler
production is forecast to increase, the gain will be insufficient to
offset declined in the other meats. Livestock and poultry prices will
be higher in 2014, reflecting tight overall meat supplies and improving
demand. Eventually production of red meat, poultry and eggs is expected
to increase when producers are able to take advantage of more favorable
margins to expand herds and flocks, and increased production will then
moderate retail prices for red meats, poultry and eggs. How soon steer
and hog prices respond will depend on whether we see improvement in
pasture and forage conditions in the Southern Plains and the west and
the extent to which PEDv can be controlled through biosecurity
practices. Despite global production records for most grains and
oilseeds in 2013, global grain and oilseed stocks remain tight going
into 2014/15 crop year. As such, feed costs and livestock margins will
remain vulnerable to potential supply shocks throughout the year.
References
MacDonald, J. and P. Korb (2011). Agricultural contracting update:
Contracts in 2008.
Charts
Figure 1
U.S. Red Meat and Poultry Production
Source: USDA-NASS.
Figure 2
Feed Costs as Percent of Total Livestock Receipts
Source: USDA-ERS.
Figure 3
Feed Price Ratios Improve in 2013
Source: USDA-NASS.
Figure 4
Per Capita Meat Consumption
Carcass Equivalent
Source: USDA-ERS.
Figure 5
Cattle Inventory as of January 1
Source: USDA-NASS.
Figure 6
U.S. Cattle Areas Experiencing Drought
Figure 7
U.S. Cattle Areas Located in Drought
Figure 8
Cattle Slaughter
Source: USDA-NASS.
Figure 9
Weekly Steer Price
5 Area Steer Price, All Grades, Live Weight
Source: USDA-AMS.
Figure 10
PEDv Positive Biological Accessions
* Virginia has reported positive environmental accessions but
have not reported positive biological accessions.
Source: AASV.
Figure 11
U.S. Quarterly Pigs per Litter
December-February
Source: USDA-NASS Hogs and Pigs Report, March 28, 2014.
Figure 12
U.S. Quarterly Sows Farrowed
December-February
Source: USDA-NASS Hogs and Pigs Report, March 28, 2014.
Figure 13
Weekly Hog Price
National Base Lean, Live Equivalent
Source: USDA-AMS.
Figure 14
U.S. Sheep and Lamb Inventory, January 1st
Source: USDA-NASS.
Figure 15
Broiler Trade by Product Type Export Volumes
Source: USDA-ERS Assessing the Growth of U.S. Broiler and
Poultry Meat Exports, November 2013.
Figure 16
Per Capita Egg Consumption
Source: USDA-ERS.
The Chairman. Thank you, Dr. Glauber.
We will go ahead and begin our first round of questions.
The chair would like to remind Members that they will be
recognized for questioning in order of seniority for Members
who were present at the start of the hearing. After that
Members will be recognized in order of their arrival. I
appreciate Members' understanding and cooperation.
Thanks again, Dr. Glauber. Let me ask you this. I will
start with the subject that the Ranking Member spent a lot of
time on. It is in the 2014 Farm Bill, includes section 12104
requiring USDA to conduct an economic analysis of the May 2013
Country-of-Origin Labeling rule with respect to its impact on
consumers, producers, and packers in the United States. This
analysis is not due for a couple of months, but I was wondering
if you could offer some insights, comments regarding your
progress and preliminary findings.
Dr. Glauber. Well, thanks very much. We are--you are right.
We certainly were aware of the language. We began looking at
preparing some of the materials and getting together some of
the literature on this. There is actually fairly extensive
literature on what the impacts of mandatory Country-of-Origin
Labeling has on potential markets. Unfortunately, few of them
are directed specifically at the rule, and I think that is the
challenge for us is to kind of look at both the 2009 and 2013
rule. But we have been looking at the economic literature. We
have been also looking at the comments filed for both rules
just to see how proponents and others are bringing other
information to the table.
It is clear that mandatory Country-of-Origin Labeling
imposes costs on the industry. I think there is no question
about that. Even our--the analyses that accompanied the
rulemaking both in 2009 and 2013 talked about that. It is also
clear that the mandatory COOL has adversely affected trade in
live animals. If you look at Canadian--Canada slaughtered
cattle is down about 25 percent from 2008. Canada feeder cattle
are down about 44 percent. Canada feeder pig imports are down
about 41 percent, and slaughtered hogs are down to almost \2/
3\.
Now, not all of that is due to COOL. Canada, their hog and
cattle industries have been under the same pressures ours have
been in terms of high feed costs and things. But the issue that
we will be trying to sort through here is what--what are the
impacts of this, how these costs are impacting things, and we
want to do a good job and we want to do an objective job on it,
and so we will be spending some time on that over the next few
months.
The Chairman. Okay. If the WTO case goes against the United
States this summer, many observers say that we are potentially
looking at $2 billion in retaliatory tariffs, a large portion
of which is aimed at our agriculture community. In your view,
is this additional economic burden on our farmers and ranchers
worth the value of MCOOL?
Dr. Glauber. Well, I am not going to comment on the case
just because of the fact that it is in the WTO, and I don't
want to prejudice anything there. The timeline, as I understand
it, is we will likely get a preliminary report in June and then
an official report published later in the summer. At that point
there could be a potential appeal by either parties, and then
after that there will be an arbitration panel, and that will
decide on the damages. If awarded damages, Canada and Mexico
would have the right to impose duties on U.S. products.
I think it was mentioned by Congressman Costa that we do a
lot of business with both Canada and Mexico. We export about $2
billion worth of pork and $2 billion worth of beef to both
those countries, so that--obviously, if some duties were
imposed against those products, that would--that would hit our
hog and cattle industries as well.
The Chairman. Thanks. Over the last couple of decades, we
have seen an upward trend in the portion of livestock
production that occurs under contract. What are the economic
forces that drive that trend, and what does it mean for
livestock producers?
Dr. Glauber. Well, of course, most livestock and poultry
farms are family owned and operated, but they are becoming more
closely linked to input providers, processors through formal
contracts, joint ownership of animals and vertical integration.
Some studies that the Economic Research Service has done
suggests that--and these actually are a little dated, so the
numbers are probably a bit higher--that more than \1/2\ of all
livestock production is now under some sort of formal and long-
term contractual relationships. Some of these contracts commit
processors and farmers to specific volumes of production to be
delivered at a specific point in time with pricing formula
based on product quality, volumes, and market conditions. Other
arrangements will pay farmers a fee for growing livestock
provided by the contractor, and we have seen that certainly in
the poultry model and in--with some hog production now.
These marketing arrangements, and I think it was mentioned
again by Congressman Costa, have been shown to have a lot of
benefit, but we--GIPSA contracted a study back in 2007 that
looked at alternative marketing arrangements that showed that
those--a lot of those contracts provided billions of dollars
to--and benefits in terms of--for both producers and then also
consumers who were looking for production to be tied to
specific consumer preferences.
The Chairman. Thank you, Dr. Glauber.
I now recognize Mr. Costa for 5 minutes, our Ranking
Member.
Mr. Costa. Thank you again, Mr. Chairman.
Dr. Glauber, as the Chief Economist for the United States
Department of Agriculture, we welcome your testimony, and
clearly, by some of your initial answers to the questions by
the Chairman, I think you are in part helping me make the case
that I was making earlier as it relates to my concerns for
mandatory labeling, MCOOL, as well as for the impacts of GIPSA.
Let me ask you, with regards to MCOOL, has your office
estimated a cost of implementation based either on the 2008
Farm Bill or on now the 2014 Farm Bill? I know we just
implemented it a couple of months ago, but are you dealing with
that?
Dr. Glauber. We are dealing with it. As the Chairman
mentioned, we have a specific----
Mr. Costa. Right.
Dr. Glauber.--provision in the farm bill to look at that.
We are looking at it. I don't have answers for you right now,
but we are looking at that, certainly.
Mr. Costa. Okay. Both for 2008 as well as for----
Dr. Glauber. Well, I think it is hard to look at the 2013
rule without considering the 2009 rule. The 2013 rule, as you
know, deals specifically with the commingling issue.
Mr. Costa. Right.
Dr. Glauber. But the labeling issue itself--and there was
some analysis done at the time.
Mr. Costa. Would it be----
Dr. Glauber. I am sorry.
Mr. Costa. Would it be safe to say that the rules or the
propagation of the rules have not been subject to an economic
impact analysis?
Dr. Glauber. Well, that is not entirely true. Both rules--I
mean, they were significant rules, and as such, they were
required to have a cost-benefit analysis associated with them.
Mr. Costa. What does the Department believe, and I know it
may be a bit out of your area, of the perceived consumer
benefit as a result of mandatory----
Dr. Glauber. Well, impact, I think the economic analysis
that was done at the time of the 2009 rule and the 2013 pointed
out that there is no direct evidence of consumer benefits,
quantifiable benefits.
Mr. Costa. Well, and that--I mean, if it is not benefiting
the consumer, and if it is not benefiting the industry, my
question is what are we doing?
Assuming--let me move on here because that--I mean, I
wouldn't go out on a limb to predict what the World Trade
Organization may or may not do, but based upon previous
decisions, it seems to me that it is likely that we may not
have a favorable ruling under the current structure. What--at
what point, if, in fact--and you talked about the timelines--
how will we respond if, in fact, trade retaliation takes place?
Dr. Glauber. Well, a couple of things. One is the case
certainly isn't settled, and certainly the USTR attorneys feel
they have a good case that they put forward here.
Mr. Costa. I have gone through amber box and the other with
Brazil and other stuff where we thought we may have a good
case.
Dr. Glauber. Yes. I understand your point. Again, with the
timetable, you are really talking about, again, if you go
through an appeal process and, presuming a loss on the appeal
process, into arbitration, you are really talking about 2015 or
so.
Mr. Costa. How about enough--different idea, plan B. Why
don't we maybe at that point cut our losses?
Dr. Glauber. Well, that is certainly--one always has--at
any one of these junctures has the ability to make a decision
whether or not to move forward.
Mr. Costa. All right. Well, I think for those of us in the
Subcommittee and those in the full Committee that think that
this, in fact, may occur later this summer, it is appropriate
that we revisit this and maybe apply a little common sense and
look at an alternative if, in fact, we get an unfavorable
ruling, it seems to me. I know that is at a--up on the higher
end on the food chain level in terms of decision-making.
But let me move onto RFS standard quickly before my time
runs out. Feed costs are a critical concern of every element of
the livestock industry. I made the comment that I think these
impacts of RFS standard has been price distorting. Would you
comment, please?
Dr. Glauber. Well, I think there is no question that the
ramp-up in ethanol production over the period 2005 to 2009 had
a big impact on feed grain costs.
Mr. Costa. When you go from 12\1/2\ percent of the
production to ethanol to 40 percent, it seems to me it would
have a significant impact.
Dr. Glauber. Well, over that period, corn use for ethanol
grew annually by about 750 million bushels. Now, not all the
price impacts over that period can be tied to ethanol. There
were a lot of things going on in the--in world markets, but
understand, too, that about \1/3\ of that corn use for ethanol
comes back in the form of feed, in the form of distilled or
dried grains.
However, I think it did take the industry a little bit of
time to work that into feed rations, and also it worked better
for some species rather than others. I think what you are
seeing since about 2009 is ethanol production has been flat,
and, again, due mainly to the so-called blend wall, that we
have--the corn use for ethanol number has been flat at around
roughly 5 billion bushels going into ethanol, and, again, \1/3\
of that coming back.
I think as we have seen a rebuilding of stock, certainly we
are seeing those corn prices come down and feed costs, but
there is no question in my mind that certainly this has been
a--was a big driver from--particularly over the period 2005 to
2010.
Mr. Costa. Thank you. My time has expired, and if there is
a second round, I would like to get into the GIPSA question,
but clearly we appreciate your testimony.
And thank you, Mr. Chairman.
The Chairman. I thank the Ranking Member.
I now recognize the gentleman from Texas Mr. Conaway for 5
minutes.
Mr. Conaway. Thank you, Mr. Chairman.
Dr. Glauber, thanks for being here.
On the GIPSA rule and the effect it might have on the
livestock alternative marketing arrangements, can you talk to
us about what the effect of the GIPSA proposed rule would have
on those arrangements and what economic impact that would then
have on consumers as well as producers?
Dr. Glauber. Well, frankly--sorry. The final rule that was
published was a lot, lot different than the proposed rule that
was published back in what, 2009 or 2010. The one in 2010 would
have--there were a lot of concerns that that would have
impacted AMAs, or these alternative marketing arrangements. The
rule that was put out in what, I guess, 2012 or 2013, I am
sorry I don't have the dates in front of me, was--stuck mainly
to the provisions in the farm--the statutory provisions in 2008
Farm Bill. With one exemption, that being the tournament
system, I think there were some things that would have affected
the tournament system for poultry producers, but because of
appropriations language, et cetera, GIPSA is not implementing
those provisions.
Mr. Conaway. Well, that is--we understand, but what would
be the economic impact if, in fact, the interpretation on these
last round of GIPSA rules did, in fact, eliminate AMAs? What
would be that----
Dr. Glauber. Well, yes. I think that the proposed rules at
the time, a lot of the concern that were expressed would be
that the costs would be quite high; that is, mainly in the loss
of AMAs. If there----
Mr. Conaway. Cost to who?
Dr. Glauber. If there is potential for--the one thing that
a lot of processors and others pointed out is the potential
impact of litigative risk, and because of that, that it would
be a lot easier just to drop the marketing arrangements and go
to more standard pricing.
Mr. Conaway. Earlier you mentioned in your testimony there
were billions of dollars involved. Would those billions of
dollars be to the benefit of consumers as well as this system,
would those have been lost in that regard?
Dr. Glauber. To the----
Mr. Conaway. Trying to not put words in your mouth. I was--
--
Dr. Glauber. Again, and this is just doing the reverse of
the studies that say that there--if indeed these market
arrangements went away. There is no question, and I think that
was certainly considered when they went--when the Department
went through with the final rule.
Mr. Conaway. Okay. The APHIS is considering beef imports
from Brazil. I am getting a lot of concern and angst, anxiety
expressed by an awful lot of beef producers and others. Can
you--and again, they are going to go through all kinds of
science and everything else, but can you talk to us about what
you think the economic impact would have in an outbreak of
foot-and-mouth disease, particularly if it migrated into the
feral hog population in Texas, and how hard it would be to
eradicate? And then what would be the overall economic impact
in your view?
Dr. Glauber. Yes.
Mr. Conaway. If we got it wrong, and, in fact, it was
transmitted.
Dr. Glauber. I know there is a lot of concern in the
industry with the proposed rules to allow imports of fresh
frozen beef in from Brazil and Argentina. In regards to Brazil,
APHIS conducted a risk analysis of the region and concluded
that beef could be safely imported. In regards to Argentina,
they conducted a risk assessment and concluded FMD was not
present in Patagonia.
Now, they allowed comment on these rules. They extended the
comment period. I believe the comment period just closed within
the last week or so, and so we have received a lot of comments
from concerned parties. People will--APHIS will be certainly
looking at these comments and will determine----
Mr. Conaway. You are the Chief Economist. Can you give us
some sort of a scientific wild guess as to what the economic
impact would be----
Dr. Glauber. Well, the economic impact----
Mr. Conaway.--if we had an outbreak----
Dr. Glauber. If you had an outbreak----
Mr. Conaway.--if you got it wrong?
Dr. Glauber.--of FMD would be pretty--pretty severe. I
mean, we know----
Mr. Conaway. It is pretty severe if you look at the
scientific proof.
Dr. Glauber. Oh, yes, you want me to round that?
Mr. Conaway. If you would, put some zeroes on that one.
Dr. Glauber. Well, I haven't--I don't have a ready answer
for you, but I can tell you that what the UK went through.
Mr. Conaway. Okay.
Dr. Glauber. They went through a fairly large destruction
of their herd, and that was pretty substantial.
However, I think it is real important to recognize that we
keep stressing to other countries to base import decisions and
any sort of things based on sound scientific principles, and I
think that when we have an outbreak of AI, or when we have a
problem like the instance of BSE----
Mr. Conaway. Right.
Dr. Glauber.--we spend a lot of time going to countries
explaining why they should be using scientific methods, and I
think that is what APHIS is trying to do here.
Now, I understand there is a lot--there is a lot of concern
about this, and presumably we are going to see a lot of that
concern, and people, whatever evidence they can bring to that,
hopefully, this will all be considered when APHIS is doing
these rules and taken into account.
Mr. Conaway. Right. I agree with the sound science. It is
hard to defend it to export American stuff and not defend it on
the imports, but I appreciate that, all those zeroes in that
pretty statement.
Dr. Glauber. Yes, sorry.
Mr. Conaway. I yield back. Thank you, sir.
The Chairman. The gentleman yields back.
I recognize the gentleman from Georgia, Mr. Scott, for 5
minutes.
Mr. Scott. Thank you, Mr. Chairman.
I would like to go back and visit what I think is probably
one of the top most crucial issues facing the future of
agriculture, and that is our fuel and our energy. And I want to
ask you what you think our future direction has to be, because
we are getting mixed reports on ethanol versus fossil fuels,
but the one thing we all know is that fossil fuels one day are
going to run out. It is finite. And so we have the alternative
here of ethanol.
I want to ask you two questions here. How can we really
answer and respond to the vast, growing needs of fuel demands
for agriculture given corn, which is arguably our most
versatile product for feed, now for energy and for feed at the
dinner table? The price of this corn has gone up in the last 7
or 8 years from about $2.50 a bushel to close to $4 a bushel.
And then now we have the debate that in some sectors the corn--
ethanol corn produces even a greater threat to the environment
than petroleum.
Now, I want to get your opinion on this because it could be
the petroleum industry wanting to set the stage for the way
they want to go versus the corn industry. But seriously, Dr.
Glauber, can you really tell us just how serious this situation
is in this corn versus ethanol, because right now we in the
United States, we import and we use--well, we use 18.8 million
gallons of oil every day, and of that, we import 12 million
gallons. So, this is the dilemma. What is the truth in this?
Dr. Glauber. Well, Congressman, you allow me to--as every
good economist, I have several arguments, and this--this allows
me to expound on it a bit more. I think that one way or the
other, I think what we have seen is ethanol is here. I mean,
corn-based ethanol is a vibrant industry, and I would argue
that you may focus on looking at the Renewable Fuel Standard.
The fact is ethanol is priced competitively to gasoline, that
blenders use it for octane reasons and other things. There are
constraints, certainly, with--blending constraints, and whether
or not that goes beyond that is anyone's guess over the next
several years. But when you see that ethanol is priced
competitively to gasoline not just here, but in foreign
markets, it goes a little bit towards explaining why ethanol
exports have actually been strong as well.
And I think that ultimately you--what you did see under the
Renewable Fuel Standard and this big growth is the capacity was
built, and right now we have a capacity for production of
around 14\1/2\, 15 billion gallons of ethanol annually, and
producers--I think those producers are going to continue to
produce ethanol from corn as long as profit margins are there,
and profit margins have been there, and I think that one way or
the other it is a part.
Now, hope--I am sorry. Go ahead.
Mr. Scott. What about the impact of land? I mean, it is the
land that we have to increase to produce more corn. The price
of land has jumped up now to about $9,000 an acre, putting a
fantastic limit on trying to get beginning farmers in. I mean,
the more corn that we grow, the more we rely on that; corn
requires land, and the more land you use for corn, the less you
use for others, and the price escalates.
Dr. Glauber. Well, two things about that, and I get back to
the fact that since about 2010 or so, we have been pretty flat
in terms of additional corn use for ethanol. We have been at
around 5 billion, so that has been fairly flat, and we are
expect--with yield growth, that means less land actually will
be going into----
Mr. Scott. I have 1--just 1 second.
Dr. Glauber. Sure.
Mr. Scott. But I wanted to get your opinion on this latest
news about corn--ethanol from corn having a greater negative
impact on the environment and climate and all of that than
petroleum, which, in my own opinion, I just can't see that. But
I am sure you have heard of these competing reports coming out.
What say you about that?
Dr. Glauber. Well, there is--yes. There are a lot of
studies that are out there, and I--it would depend on which one
you are talking about. I think it is clear that at least of the
analyses that have been done, it suggests that the so-called
indirect land use that have--of bringing--by virtue of the fact
that we are growing more corn here, that we are creating
demands for other commodities like soybeans in other countries
that are creating, for example, Brazil tearing down forests
which emit greenhouse gas emissions or whatever, the studies
have tended to show that those impacts are likely less than
what people thought maybe 5 years ago.
Now, granted, a lot--there is a lot of uncertainty in these
estimates anyway, and in small changes in terms of what you
think about yield growth, or what you think about yield growth
in U.S., or what you think about yield growth in Brazil or some
other part of the country--world can impact these analyses. And
I know in this body we had a big hearing on this about 3 or 4
years ago, and so I think that these studies show that the
impacts--for the most part, the studies are concluding now that
the impacts are less than otherwise thought, but there are
other issues like water quality, other things that people bring
up, and I would be happy to chat further on this with you.
Mr. Scott. Thank you, sir.
Thanks for the extra time, Mr. Chairman.
The Chairman. Absolutely.
The gentleman yields back.
I recognize the gentleman from Iowa, Mr. King, for 5
minutes.
Mr. King. Thank you, Mr. Chairman, and I appreciate your
testimony, Dr. Glauber.
The subject that was brought up here by a couple of my
colleagues generally from the other side of the aisle on the
ethanol issue essentially directs my discussion as well. And I
just punched the calculator here. I actually went on the
Internet, and I thought what kind of corn increases have we
seen in the memory of my lifetime? And when I heard the
gentleman from California say that corn has--we were using
12\1/2\ percent of our crop at one time for ethanol, now it is
40 percent, that number, I guess, actually 38 percent of our
crop, but I heard you say that \1/3\ of that is coming back.
Could you explain that to the panel, please?
Dr. Glauber. Well, in the ethanol production process, you
convert a bushel of corn, you get ethanol out of it at around
2.7, 2.8 or so gallons, but what--excuse me. With that comes--
about \1/3\ of that volume comes back in the form of a
byproduct, and it is something called distilled or dried
grains, which----
Mr. King. Let me define that----
Dr. Glauber. Yes.
Mr. King.--just a little more precisely.
Dr. Glauber. Sure.
Mr. King. And that is this: A bushel of corn breaks down at
about three different parts, starch and protein and
CO2. And CO2 is a byproduct of ethanol
production, but it is also a byproduct of feed consumption. So
I would submit that it is more accurate to say about \1/2\ of
it comes back, because \1/3\ of the product goes off into the
air and CO2 whether you feed it or whether you
convert it into ethanol. And I wanted to--I wanted to submit
that into the record for discussion and actually ask your
response to that.
Dr. Glauber. I would have to look at the--typically, just
on a matter basis, been focusing--we focus--tend to focus on
about \1/3\ in terms of the volume of that comes back.
Mr. King. I would ask you, if you could, come back to me
and perhaps the panel with a response to that.
Dr. Glauber. Sure.
[The information referred to is located on p. 106.]
Mr. King. Because I think it makes a difference. And we
have quadrupled the corn production, in my memory, in my
lifetime, and we are watching as yields have gone from 80 to
100 bushel starting back in that time in my memory up now to
where there is a strong prediction of 300 bushel, and I have
neighbors that are disappointed if they don't do 200 anyway. I
think that is a--the market distortion of this that was
addressed by the gentleman from California, do you agree with
that statement that corn going into ethanol is market
distorting?
Dr. Glauber. Well, I think corn going--certainly the ramp-
up that we saw from 2005 to 2010 had a big impact on the
increase in corn prices and soybean prices. Now, not all. We
saw a big impact--we saw a lot of growth in world demand, we
saw high energy prices, a whole range of factors, but you
can't--people ask me about that, and if we were--if I were to
tell you that corn exports increased from 1 billion bushels to
5 billion bushels and then say there was no impact on corn
prices, you would look at me like I was crazy, and you have a
similar thing going on with ethanol, but it is not the only
thing going on with corn prices.
Mr. King. I agree. And don't I recall the petroleum prices
shot up a lot more than grain prices did during that period of
time?
Dr. Glauber. Petroleum prices hit record levels over that--
particularly the run-up to 2008.
Mr. King. Corn prices did, but also petroleum prices shot
up to record levels. And if we are going to accept the premise
of the gentleman from California that it was market distorting
on grain prices because of ethanol consumption from corn,
wouldn't we apply also the same formula that it was market
distorting to gas prices, and that they would have gone up a
lot more had we not had those billions of gallons of ethanol
into the marketplace?
Dr. Glauber. Well, and just to build on a point I made
earlier; that is, ethanol has been priced very competitively to
gasoline. The fact is for the long-term--what happens in the
ethanol market will largely be determined by energy prices, and
if oil prices continue to go up, then there is going to be
demand for alternative fuels like ethanol.
Mr. King. And it is true that a little over a year ago when
I did a look at this, 24 percent of the domestically produced
liquid fuel that is burning in gas-burning vehicles was corn-
based ethanol. And can we--can you speculate as to whether we
took--if we took 24 percent of a supply of any of the
commodities, whether it be the gentleman's rice, or whether it
be the corn or the beans, if we took 24 percent out of that
marketplace, what would happen to the market prices?
Dr. Glauber. Well, you would see an increase.
Mr. King. Dramatically.
Dr. Glauber. Yes.
Mr. King. It would be dramatically.
And so I just quickly ask this question as I watch this
clock tick down. As I understood in your comments on COOL, I
would just make the comment that if the Administration would
strongly come out and support voluntary COOL or repeal of
mandatory COOL, we could get this done in the House and the
Senate, and would bypass a lot of this discussion, and would
save billions of dollars, and it would be a lot better deal to
do with our trade partners.
But I wanted to ask you the economic question, and that is,
on the egg issue, if California is successful in doubling the
size of cage sizes and infrastructure for the egg producers in
this country by regulating all of America from California by
state statute, what happens to that requirement for
infrastructure investment on the part of all egg producers in
America?
Dr. Glauber. Well, certainly the concern--I know at the
time the state regulations were being debated and going into
force, there was a lot of concern among the California egg
producers about what those costs would mean for them and the
additional costs on egg production. And so I frankly haven't
looked at the individual studies as closely, I would be happy
to get back with you on that, but any time you put in specific
standards like that, there are costs.
Now, weighing that against what the benefits are for
consumer is the other side of that, and, again, I don't have
any good numbers for you.
Mr. King. I would appreciate it if you would get back to me
on that, and I would just point out that doubling the
infrastructure size doubles the cost, and that is the report I
get back from them.
[The information referred to is located on p. 106.]
Thank you, Mr. Chairman. I yield back.
The Chairman. The gentleman yields.
I recognize the Member from Oregon, Mr. Schrader, DVM, for
5 minutes.
Mr. Schrader. I will actually pass, Mr. Chairman, since I
was unable to hear the testimony, and defer to my colleague
from Connecticut.
The Chairman. Outstanding.
I will recognize Mr. Courtney from Connecticut for 5
minutes.
Mr. Courtney. Thank you, Mr. Chairman. Thank you, Mr.
Schrader.
I am going to give you a break, Dr. Glauber, from corn for
a few minutes. And I wanted to talk to you a little bit about
USDA which has done some research about consumer demand for
local meat and poultry which has shown that it is a pretty hot
item for consumers, and even in Connecticut, we are
experiencing that and hearing all about it, and it is a pretty
exciting development, particularly for farmers all across--
small farms all across the country.
The biggest sort of challenge that I hear a lot about, and
I am sure I am not alone, the challenge of trying to process
livestock in places that aren't part of the big supply chain of
large meat producers. And again, given the fact that USDA has
sort of confirmed this trend in terms of consumers, I was
wondering if you could talk about whether or not USDA has some
ideas and prescriptions about trying to really take advantage
of this really exciting opportunity.
Dr. Glauber. Right, Congressman, and you are absolutely
right. If you look at meat processing, it is a low-margin
business, and the successful ones, you need a lot of
throughput. But you weigh that against what has been going on
generally across the country in terms of increased demand for
local foods, those sorts of things, you clearly have a lot of
people interested in that.
Now, the problem with a local processor is that they have
to deal with all the same issues everyone else does. They have
to deal with the same regulations, food safety regulations.
FSIS has--they have now a website, or a special place on their
website oriented towards small and very small processors to go
through all the regulations to make sure that everyone is aware
of that. That alone is actually a fairly big cost just knowing
what you have to do.
They have some local food outreach efforts under way, and I
would say that is true for producers as well. I mean, you look
at getting certification for grass fed, with your small herd,
under 50 head, those are--those are costly processes, and AMS
has been putting forward a lot of effort to try to make those
more accessible. They are on the verge of announcement of a
Small and Very Small Producer Program that would certify for
those sorts of things. So, how to address these niche markets
and make it so that they can do a better job in a less costly
way, particularly for kind of getting through the morass of
regulations and all of that, to understand that better and to
know kind of how to do it, at least FSIS, it seems like they
are--they have a pretty strong outreach effort that--under way
right now.
Mr. Courtney. The Cooperative Interstate Shipment Program
also seems to be a way of trying to aggregate resources so
that----
Dr. Glauber. Yes.
Mr. Courtney. You know, in a place like New England, for
example----
Dr. Glauber. Right.
Mr. Courtney.--that a collection of small livestock
producers could have a proximate facility to go to. Again, it
seems like that is a program that USDA can also help to
promote.
Dr. Glauber. No, absolutely. And you mentioned Economic
Research Service just last year, last summer put out an
excellent report on local foods and local processors of that. I
will get you a copy. It is very good. They have a lot of case
studies about how a lot of these businesses face all these
additional costs, but then found ways through it and are
seemingly thriving right now.
Mr. Courtney. I yield back, Mr. Chairman.
The Chairman. The gentleman yields back.
I now recognize Mr. Yoho, DVM, for 5 minutes, the gentleman
from Florida.
Mr. Yoho. Thank you, Mr. Chairman.
Dr. Glauber, I appreciate you being here and your
testimony.
Going back to the RFS, I hope for a complete repeal of
that, but if not, in times of uncontrolled climate and growing
conditions, what we saw, I think it was what, 2011, 2012----
Dr. Glauber. Right.
Mr. Yoho.--when the prices of corn shot up in our area,
people were selling it for close to $9, $9.50 a bushel, which
is unheard of in Florida, it was contracted, and we saw
obviously the price of feed go way up. And in those kind of
conditions, can we get the EPA--and I know it may be out of
your jurisdiction, but would you recommend that they relax the
mandate for X amount of gallons, 14 billion gallons it was at
the time, to suspend that for a period of time until we can
take care of the need of the food source for America?
Dr. Glauber. Congressman, I remember the waiver request
quite well, and EPA does consult with--is required by law to
consult with USDA during those waiver requests. Part of the
problem--problems--well, no. Part of the problem is the fact
that these are short-term waiver requests, and in looking at a
waiver like that, I don't think you would have seen a gallon
less ethanol produced largely because the gasoline blenders,
others were using ethanol to enhance octane in gasoline
supplies, so they needed--they needed ethanol, and they were
bidding up the price of ethanol. They were creating high
margins. That is something that, again, don't forget, even
outside the regulatory structuring, and some are--obviously
regulatory structure influences a lot of behavior, but outside
the regulatory structure, there are a lot of economics.
Mr. Yoho. Right.
Dr. Glauber. And the fact is--with trying to get a--with
the RFS, these gasoline blenders, over time, have utilized
ethanol as a cheaper source of octane, and so to get rid of
ethanol overnight, they would need octane, and so I think
that--that is one of the reasons EPA concluded at the end that
the waiver would have very little impact.
Mr. Yoho. Okay. You are saying also, too, that----
Mr. Costa. Would the gentleman yield?
Mr. Yoho. Yes.
Mr. Costa. Just point of information. Congressman Goodlatte
and I had the opportunity here a few weeks ago to meet with the
Environmental Protection Agency Administrator, and when we
talked about the RFS, she said that this is the most difficult
rule she has ever had to try to implement. Just to put that in
the context of your conversation.
Mr. Yoho. Okay.
Mr. Costa. The most difficult rule she has ever tried to
implement.
Mr. Yoho. Well, that brings me up, you were saying that the
price of ethanol is competitive. Would it be competitive if it
wasn't for the 45 per gallon tax credit?
Dr. Glauber. That is gone.
Mr. Yoho. That is gone?
Dr. Glauber. Yes, that has been gone a few years now.
Mr. Yoho. My mistake then.
Let me switch over to the foot-and-mouth disease, the
economic impact. You don't have a figure for that other than it
has a lot of zeroes behind it?
Dr. Glauber. Well, I don't have a--no, I don't have a
number on that. I mean, it is a legitimate issue, and then
certainly again you can look at countries likes Taiwan or
look----
Mr. Yoho. I did, and I looked at the economic impact on
those countries. It ran into billions of dollars. And we looked
at a study that had just five of the larger feedlots in
America, but if it came here, it would be in the billions of
dollars. And if you look back at BSE when we had the threat of
the outbreak from the cow from Canada that went to Washington,
that cost billions of dollars for a nondisease. But just the
perception of American livestock or the quality of our beef,
and I would urge, if you have any control, to work with us to
make sure this beef doesn't come in until they have the
safeguards in place that we know 100 percent, as much as we
can, that it will not infect our livestock in this country. I
mean, the livestock industry, especially the beef industry, is
such a vital component of our economic sector.
And then I wanted to ask you real quickly on the porcine,
the PEDv, are those hogs covered under the Liability Livestock
Indemnity Program?
Dr. Glauber. They are not, and largely the Act is pretty
specific about tying it to adverse weather, unfortunately.
Mr. Yoho. Okay.
Dr. Glauber. And for that reason we haven't considered
indemnification under the Act.
Mr. Yoho. All right. I yield back, Mr. Chairman. Thank you.
The Chairman. The gentleman yields back, and I recognize
the gentleman--do you want to go ahead and--okay. The
gentlelady from New Mexico for 5 minutes, Ms. Lujan Grisham.
Ms. Lujan Grisham. Thank you, Mr. Chairman, and I want to
thank Dr. Glauber for being here today. And I am going to do--
take a shift from corn, but continue to talk about how
difficult it is to both project out the economics of the
industries that we are talking about today in light of things
that we cannot control.
So, in New Mexico, we are, as I am sure most people are
aware, like most of the Southwest, in a significant drought. In
fact, while the drought has been occurring for decades, we are
in the 4th consecutive year of the most severe drought we have
ever experienced, and I don't think that the scientific
predictions about where we are headed is positive, so that
extreme drought--not just drought, extreme drought conditions
are the new norm.
Now, given that the livestock industry is a critical part
of our state's economic aspect, and given that we have seen in
the--in decades an increase in that--more than a 50 percent
decrease, decline, in the livestock industry, specifically
cattle, I am really interested in what USDA and what your sort
of economic predictions--what can states in this situation
begin to do that both recognizes that USDA--although if you
can, I am all in--and, Mr. Chairman, I will launch a bill
immediately; if you can stop the drought, that would be great.
I am completely in. Or if maybe this rain from D.C. can be
moved over, I am in. But short of that, what strategies, both
conservation investments and looking at cost issues, supportive
investments in controlling the cost of feed, what else can we
be doing that enhances our opportunity to continue to grow
cattle in New Mexico? And, in fact, we have lost families who
were growing cattle for generations, who not only can't afford
to do it, but have left the state, and bringing them back into
this industry I don't see as an opportunity for us.
Dr. Glauber. Yes, I think this is a huge challenge. You
look at since 2011. I mean, with the national herd, it is down
more than five million head. If you go to states like New
Mexico, Texas, Oklahoma, Kansas, I mean, you are talking almost
\2/3\ of the losses are in those states alone, I mean, and it
has--I mean, you--I can remember about--well, I can tell you it
was 2010, a friend of mine from out near Lubbock, I was talking
to him. He says, it looks like Ireland out here.
Now, I don't know if he had ever been to Ireland, but the
fact was that was the last time it was actually they had good
rainfall, and they just haven't. You look at these--some of the
countries there. We have 45 percent of the cattle herd right
now is in areas that are in drought, and while that is down
significantly from where they were in 2012, it is still quite
high.
And what happens is, of course, as you contract, you have
problems with the processing industry, et cetera. I mean, we
lost Plainview, the plant in Plainview. We lost--we are likely
to lose, or we are scheduling now, the Brawley plant is going
to go offline, and that means that you have to ship--if you are
a cow/calf guy or whatever, and you need to ship cattle out of
the state.
And there was an article in the press just about southern
California cattle producers in Imperial and elsewhere, having
to move things out to the Panhandle to get processed. That is
the longer-term issue that I think you have, and that is, how
do you turn that around? Part of the problem with a cow/calf
guy is what you need for expansion is you need someone to say,
okay, well, I am going to retain these animals and----
Ms. Lujan Grisham. And the impact--and I don't mean to
interrupt you----
Dr. Glauber. No, no.
Ms. Lujan Grisham. The reality is that, then we continue to
see an escalation in beef prices, we have talked about consumer
demand, so we have a problem in managing an industry that we
want and need, any strategies more than--and I appreciate
identifying the problems, and again, if I had the magic
bullet--but are there things that we could start doing as a
region that can enhance our opportunity given this climate to
rebuild some of these herds and to manage some of the beef
prices in a way that provides recoverable profit, recoverable
building in herds, for livestock producers and also manages
this economic issue for consumers?
Dr. Glauber. Yes, well, one is, I am happy to give that a
little thought and get back to you on that. I mean, obviously,
the easy answer is let it rain, but to get pastures back and
then even then to get people willing to expand----
Ms. Lujan Grisham. Correct.
Dr. Glauber.--that is going to take time. And when we are
looking at a national herd, a national herd not really
expanding until looking at 2016, 2017, you can imagine in areas
that have been hard, hard hit by drought that that is even
tougher.
Ms. Lujan Grisham. Well, and Mr. Chairman, I know that my
time is up, but I would really appreciate if you would think
about that, respond to me and the Committee, because given the
nature of this issue in that we don't control the weather and
drought is probably the new norm, much like some of the
commodities investments to manage that effort more productively
and economically, there may be some strategies that the
Committee ought to consider certainly.
The Chairman. I thank the gentlelady.
Ms. Lujan Grisham. Thank you.
The Chairman. I now recognize the gentleman from Wisconsin,
Mr. Ribble, for 5 minutes.
Mr. Ribble. Thank you, Mr. Chairman.
Good morning, Dr. Glauber. I know you have been here a long
time, but I appreciate the thoughtfulness of the conversation
today. I am from Wisconsin, and Wisconsin, our number one
export market for agriculture and agri-food is Canada. So my
question is going to kind of go right full circle from where we
started today and see if I can maybe try to get some clarity
for Wisconsin's agribusiness who are very concerned about the
labeling regulations.
This is a significant concern for me, as their
representative and for my constituents given that Canada is
Wisconsin's largest export market. Is your economic analysis
going to consider a state-by-state impact of the COOL
regulations, and by the way, for Wisconsin's $1.2 billion?
Dr. Glauber. Congressman, certainly we can look at state-
by-state impacts. I mean, what is hard is to get the individual
movements out of those states. But in looking at aggregate
effects, one can then back off certainly proportionate impacts.
I understand, having lived in Wisconsin, I understand the
proximity----
Mr. Ribble. It is a big deal.
Dr. Glauber.--and other things. The importance of Canada as
a market.
Mr. Ribble. Yes, it is really important. And any type of
retaliatory move by the Canadians would be devastating to
Wisconsin's agribusiness. It is hard to make up $1.2 billion of
export volume. I think it would be helpful.
And, Mr. Chairman, if it would be okay with you, I would
like to submit the data into the record.
The Chairman. Without objection, so ordered.
[The information referred to is located on p. 105.]
Mr. Ribble. And I don't think it is just Wisconsin, but
obviously, because I am from Wisconsin, I am so much aware of
what has been going on there and the amount of effort to try to
get some type of parity with the Canadian Government, and the
work that has been done by Wisconsin farmers to really enhance
their products to the Canadian consumer.
And so, to the degree that you could drill into the data
further and provide it for us, and I realize it is difficult
for you to comment on some of this because of what is going on
at WTO, because we do have an obligation in many respects to
follow our trade rules and so, but I really do appreciate you
being here and doing that.
So, and with that, Mr. Chairman, I will yield back.
The Chairman. Gentleman yields back.
I now recognize Mr. Schrader, the gentleman from Oregon for
5 minutes.
Mr. Schrader. Thanks, Mr. Chairman, I appreciate it.
Following up on my colleague from Wisconsin's remarks, COOL
has had a huge impact already in the Pacific Northwest that I
come from, and I was talking to a firm the other day, and they
have already seen $2 million hit to their operational line and
$2 million hit to their marginal line, and it is kind of
devastating if you are from one of the border states or border
regions of this country.
I would hope that there would be some flexibility within
the Administration to look at some simple changes that might
enhance North American beef operations that are just
intermingled by the very nature of the global market that we
see right now. We are not talking about Australia, New Zealand,
China or Japan; we are talking about Mexico and Canada, our
historically long-term trading partners. So anything you could
do in that regard, Mr. Glauber, shed a light on some of those
problems would be helpful.
Dr. Glauber. Sure. Well, and as you mentioned, particularly
those countries that are bordering, or those states that are
bordering, Mexico and are close to Mexico and Canada, that is
where a lot of that sourced live animal trade has been going,
and we know that processors are having to make adjustments
there and just the sheer decline in volume has to be made up
somewhere or you are looking at reduced processing, and at a
time when overall processing numbers have been going down just
because of the decline in the herd, et cetera.
In all fairness, at least the position has been because of
the first WTO ruling that the decision to put forward the 2013
rule, it was felt that that is what was needed to come into
compliance with the WTO ruling. Now, that is what obviously is
being decided in a compliance panel and will be ruled upon in
June or later this summer.
Mr. Schrader. Well, and the retaliation would be
devastating. We know from the Mexican trucking issue, much
likely what is going to happen both in Mexico and probably
similar things in Canada.
Switching gears a little bit to the trade issues, that is
real important, hopefully great opportunity for American
agriculture, but I am concerned about some of the opportunities
that do not seem to be forthcoming so far. I wondered if you
could shed a light or had any insight or using USDA's influence
to deal with Canada on the dairy issues for instance, Japan on
the beef issues and making sure Australia and New Zealand don't
devastate the sheep industry and lamb industry here in our
country.
Dr. Glauber. Well, I have to tell you, if we were having
this hearing 25 years ago, the only thing we could be talking
about is imports or disposal of surplus production. I mean, it
is amazing the turnaround, and you look at how important pork
exports are to the hog producers, how important beef exports
are, how important dairy exports are. I mean, dairy. We are
looking at record--I know it is not a hearing about dairy, but
record dairy exports.
So you look at countries like Canada that we view as
potentially very attractive markets for U.S. product, and dairy
is one of the few commodities that are outside of the CUSTA
(Canada-U.S. Free Trade Agreement), and particularly for TPP,
you look at Japan, and then, looking beyond that, the idea is,
hopefully you would see other countries come in and you would
look at countries like China and others that have been growing
markets for products like dairy products. I think this is very
important for the overall health, long-term health.
Mr. Schrader. My question basically is, is USDA weighing in
heavily so that, we don't want a lot of people in a TPP that
aren't willing to play on a level field. Japan historically has
been very, very restrictive and very closed to American
agriculture. I am worried about flip side of that whole
discussion in New Zealand and Australia and the lamb industry.
Dr. Glauber. I think the key to TPP is have an ambitious
round. I think there is no question about that. You want to get
the most access you can, and that is where the pressure has
been. And the fact that we haven't been able to quite reach a
deal with Japan is we are pushing for a much measure aggressive
outcome.
Mr. Schrader. I guess, it wouldn't be right to not comment
on the RFS like everyone else has at the end of the day. Your
testimony states pretty clearly that the increase in feed
prices can be associated, obviously, with the RFS standard.
Would you say that is an accurate statement?
Dr. Glauber. Well, as I have said----
Mr. Schrader. At least a significant point----
Dr. Glauber. You know, what I say is, I think that
increased----
Mr. Schrader. Deep down.
Dr. Glauber.--increased feed prices has certainly been in
part due to the increased ethanol production. Now, how much of
that is due to RFS? How much of that is due to high energy
prices is a matter for discussion, because certainly over that
period energy prices have propelled a lot of this.
Mr. Schrader. I think, with all due respect, I have to
finish up here, that the next panel will tell every single
livestock out there is going to suggest the that there is some
slight significant----
Dr. Glauber. Yes. I have read their testimonies.
Mr. Schrader.--and very direct correlation between the
increase in feed and the RFS standard.
And with that, I yield back, Mr. Chairman.
The Chairman. Thank you, Mr. Schrader.
I now recognize the gentleman from Texas for 5 minutes, Mr.
Neugebauer.
Mr. Neugebauer. Thank you, Mr. Chairman.
Dr. Glauber, thank you for being here today. I want to go
back and make sure, the question was asked to you a while ago
and I want to make sure, just for the record that I understood.
When you were asked if there was any benefit, if COOL had any
benefit to the consumer, I believe your answer was no; is that
correct?
Dr. Glauber. Yes. Let me clarify that a little bit, because
I think----
Mr. Neugebauer. Well----
Dr. Glauber. No, no, no. Please, let me, if you don't mind
me I will just take a second.
Mr. Neugebauer. Be short.
Dr. Glauber. And all I was going to say is that a lot of
consumers will say in surveys where they ask about that, they
will say, yes, they would like to have information, they would
like to have more information about product including origin.
The difficulty in what USDA concluded in looking at a lot of
the studies is the willingness to pay. Are you willing to pay
for that? And there the answer is no, they are very negligible.
Mr. Neugebauer. So the answer is no benefit to the
consumer. So then, the other part of it, the ethanol you said
was a vibrant industry. Is that right?
Dr. Glauber. I am sorry, vibrant?
Mr. Neugebauer. Yes.
Dr. Glauber. Yes.
Mr. Neugebauer. You said that. But you know, in my
district, and I don't know what it is about in my district, but
every ethanol plant in my district----
Dr. Glauber. Is shut.
Mr. Neugebauer.--has gone bankrupt.
Dr. Glauber. Yes. Well, you have to have access to cheap
feedstocks, and I think you have seen fluctuations in that
market.
Mr. Neugebauer. Yes. So I want to go back to the COOL
issue. You know, you don't see the benefit. We have our trading
partners, our largest trading partners now threatening to
impose tariffs on our country. I think one of the things the
livestock producers in my area are going through was, you
mentioned a while ago when you were talking about Lubbock,
Texas; I am from Lubbock, Texas. And, I remember going through
a horrible drought. The herds are way down, and the feedlot
numbers are shrinking and it is going to take a long time to be
able to build these numbers back up when it rains again.
I think that the producers in my area are feeling very
vulnerable in the sense that they have this COOL issue cloud
hanging over them; they have the drought; and now they are
concerned about this Brazilian beef and the potential to bring
hoof-and-mouth disease to this country.
The question I have is, when you did the analysis for
Brazil, now, I understand you used the qualitative method, but
when the analysis was done, for example, in 2002 for Uruguay,
they used the quantitative analysis. Some people speculate that
the qualitative analysis is fairly subjective and that the
quantitative analysis is a more thorough. As an important issue
as this is, why would we have used a different analysis than we
have used previously?
Dr. Glauber. Congressman, you raise a good question. I
can't answer it. The FSIS did that analysis. I would be happy
to get back to you with a more complete answer on that.
[The information referred to is located on p. 107.]
Mr. Neugebauer. Well, I just think that we are at a very
sensitive time here with particularly that industry and that
these decisions should not be made lightly, and because I think
that in many cases a lot of our cow/calf operations are
struggling to stay viable.
And obviously that, as you mentioned, moves up the food
chain, so to speak, has impact on the processors and the
feedlots; and that the economic consequences of these sanctions
or if we were to have an outbreak in this country, that would
be astronomical and very detrimental to the industry and, quite
honestly, to my district.
Dr. Glauber. Well, first, sorry, I misspoke. I said FSIS,
of course, I meant APHIS. But, again, APHIS feels strong about
the fact that they have done a good, scientific job that will
hold up to scrutiny. Now, again, I think that we have seen a
lot of comments. They will be looking at that, and again, I get
back to the fact that we are concerned about bringing in a
disease that could potentially be devastating. We also want to
make sure that we are not just using a precautionary principal
to keep things out because we want to be held by the same
standard elsewhere and, again, I don't say that to minimize one
or the other, but to get back to the fact that this has to be
based on sound science.
Mr. Neugebauer. Well, I do agree and I am pro-trade, but
the stakes are very high that if we don't get this right that
there would be consequences here. And I just----
Dr. Glauber. Yes, I would agree with that.
Mr. Neugebauer. If we are using different methods, I think
an explanation of why we use different methods is probably in
order.
The Chairman. The gentleman from Texas yields back.
I now recognize the gentleman from Pennsylvania, Mr.
Thompson, for 5 minutes.
Mr. Thompson. Mr. Chairman, thank you. Thank you for
hosting this hearing.
Dr. Glauber, thanks for attending and sharing your
information. I would just go with one question because I have
to get down the hallway to Resources for a vote, and it is
going to be the opposite of drought; it is where we do have
water. You know, with the release of the new waters of the U.S.
rule, there clearly is enormous amount of confusion on how the
rule might impact agriculture and private land ownership. Is
the USDA considering any analysis of this new rule in how it
might impact the agriculture community?
Dr. Glauber. We are looking at the rule. We are consulting
with EPA, and so we will be looking at it in more detail, yes.
Mr. Thompson. Okay. Any early indications? The EPA seems to
be talking about, at least the early releases, although I have
not found the substance to back it up, that this was not going
to change any agriculture practices, it should improve things,
but there doesn't seem to be any substance to that at least so
far that has really any evidence to really substantiate so far.
Dr. Glauber. Well, and certainly, USDA has been working
with EPA on that to try to clarify those rules. To try to, I
mean, that is what certainly our officials have been saying, as
well, and I think that the more clarity that can be laid out
there, the better for producers, so there is some certainty, so
they aren't operating under some cloud.
Mr. Thompson. Okay. Thank you, Dr. Glauber.
Mr. Chairman, I yield back.
The Chairman. The gentleman yields back.
And we are almost complete. Dr. Glauber, I have just two
quick follow-up questions. One of them is on behalf of the
Ranking Member and he asked me to ask this question in his
absence, since he is over, like many of the Members doing in
dual duty today, he is in Financial Services right now.
But his question was, what exactly do you propose that
would allow GIPSA to promote fair business practices and
protect competitive markets but not cause undue harm to the
industry?
Dr. Glauber. Well, I think that GIPSA has put forward what
was in the final rule. They, again, in the main, stuck to most
of the provisions that were called out for and put in place
that were explicitly mentioned in the 2008 Farm Bill in terms
of statute.
It is a delicate balance, because what you want to do is
you want to ensure that there is fairness in the marketplace.
Certainly the Packers and Stockyards Act charges GIPSA for
overseeing that. So you want to do it in a way that ensures
that everyone is treated in a way that isn't discriminatory.
But at the same time what you want to do, obviously, is do it
in a way that you aren't causing, prohibiting new practices to
emerge or whatever.
And I think that that is the balance that--that when the
Secretary looked at moving forward from the proposed rule to
the final rule he said a lot of these things look like, just
given the comments that we were receiving and other things and
analyses that we had done internally at that point, suggested
that the costs were greater than he had first believed or had
understood. And that was one of the reasons why we went forward
in the final rule with a much shorter list of provisions.
The Chairman. Thank you.
And final question: Proponents of mandatory Country-of-
Origin Labeling will say that consumers actually want to know
where their food comes from, but they will argue that in fact
consumers are willing to pay a premium for that. If in fact
that is the case, from your economic perspective, you are an
economist, and I will ask the same question to the producer
groups, as well, but from your perspective, if in fact that was
a natural-occurring market dynamic, wouldn't that have been in
the interest of those producers years ago, recognizing that
there was a premium that consumers were willing to pay and they
would have voluntarily implemented that and we would have had
this going on forward from then?
Dr. Glauber. The short answer is yes. The voluntary
Country-of-Origin Labeling you presume would happen if you
thought there was a premium to be gained there, and if you were
to go into a Whole Foods you see an example of what people are
putting on labels that are obviously appealing to consumer
interests. Yes, I think that, that is certainly the argument.
The analyses that have been done, and there was a fairly
rigorous analysis done and published this last year that looked
at this issue, I believe out of Kansas State, that looked at
the willingness to pay for--that consumers were willing to pay
for mandatory Country-of-Origin Labeling and the numbers were,
again, negligible.
The Chairman. Thank you, Dr. Glauber.
And this concludes our first panel. I appreciate you being
here. I appreciate your time, your patience and your
cooperation, Dr. Glauber. Thank you very much.
The clerk will now prepare the table as I introduce the
witnesses for the next panel.
We have a number of groups being represented, seven in
total. This will be a big panel. And I will start with a list
of those witnesses and who they represent before we recognize
them to speak. Mr. Roger Johnson, President of National Farmers
Union.
Mr. Shane Miller, Vice President, Pork Margin Management,
Tyson Fresh Meats of Dakota Dunes, South Dakota. Let me say to
Mr. Miller before we go any further, as you know, most people
know that in our neck of the woods we had some severe weather
earlier this week devastating, some 15 fatalities, loss of
property and more importantly loss of life, but displaced
families, 3,000 homes at the very least that were destroyed.
But I just want to thank Tyson for stepping up and being
the good neighbors that they have been in the relief efforts,
providing product to families who literally have no idea where
their next meal is going to come from as a result of that. So
thank you to Tyson for your good neighbor attitude and good
stewardship.
Dr. Howard Hill, President National Pork Producers Council,
Cambridge, Iowa.
Mr. Michael T. Smith, Special Projects Manager, Harris
Ranch, Selma, California, on behalf of National Cattlemen's
Beef Association.
Our next witness, I apologize if I butcher your name, Mr.
William P. Roenigk.
Mr. Roenigk. Correct.
The Chairman. Excellent.
Senior Vice President and Economist, National Chicken
Council, Washington, D.C.
Mr. Clint Krebs, President, American Sheep Industry
Association, Ione, Oregon. I hope I didn't mess up your
hometown, my apologies if I did.
And Mr. Matthew T. Cook, President and CEO, Norbest, Inc.,
Washington, D.C., on behalf of the National Turkey Federation.
And, if our panelists are seated and ready to go, we will
begin. I will start with Mr. Johnson, President of National
Farmers Union. And I just remind you that because we have such
a big panel, we will ask you to really watch that clock so that
we can give an opportunity for everyone to make their comments
in a timely fashion. Any extraneous comments, obviously, are
part of your written testimony.
So with that, Mr. Johnson, you are recognized to begin your
testimony.
STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL FARMERS UNION,
WASHINGTON, D.C.
Mr. Johnson. Thank you, Chairman Crawford, and Members of
the House Agriculture Subcommittee on Livestock, Rural
Development, and Credit.
My name is Roger Johnson, the President of National Farmers
Union. Thanks for the opportunity to testify at this hearing.
National Farmers Union is a grassroots organization of about
200,000 family farm members. It is organized in 33 states. Our
policy positions are developed by our members.
As a general farm organization, we represent producers who
raise livestock of all kinds. Even though there are significant
differences among them, there are common challenges. Decreasing
market competition poses a threat to livestock producers.
Consumers are demanding significantly more and more accurate
information about the food that they purchase and consume.
Arguments that pit the biofuels industry against the
livestock growers are counterproductive and possible trade
policy changes that will be talked about here are likely to be
harmful. Congress and this Subcommittee must carefully consider
all of these issues and others.
Rural America has lost 1.1 million livestock farms in the
last 30 years. You can see this in Figure 2 of my testimony.
Since 1980, we have lost 34 percent of beef operations, 91
percent of hog farms. There are also fewer meat packers and
processors. Economists say an industry is not competitive when
the four largest firms control 40 percent or greater of a
market. Very little competition remains if that figure exceeds
60 percent. Today the top four beef packers control 81 percent
of the cattle slaughter in the U.S., and the top four swine
producers control 65 percent of hog sales.
Fewer buyers result in less competition, greater
opportunity for antitrust violations and a difficult market for
the remaining farmers and ranchers. USDA has the authority to
prohibit deceptive or fraudulent buying methods by processors
and may protect farmers and ranchers if they have been harmed
by unfair trade practices.
Appropriations riders over the last 3 years have kept the
department from implementing these basic fairness rules. Future
riders that impede enforcement of the Packers and Stockyards
Act must be opposed. I commend Congress for maintaining the
current Country-of-Origin Labeling standards in the 2014 Farm
Bill. Consumers want to know more about the food they purchase.
Farmers and ranchers are proud of what they produce. Studies
have shown 95 percent of consumers want COOL. We should support
efforts to provide consumers with accurate information that
will help them make informed buying decisions and remain
confident in the integrity of our food supply.
USDA completed over 2,000 COOL retail reviews last year,
and at least 3,300 are planned for this year. Overall retail
compliance is about 96 percent. COOL is implemented and is
working as intended. Proceedings at the WTO and in U.S.
District Court have not found the COOL lot to be out of
compliance. Even in the event of a decision against COOL, the
appeals process and compliance periods would allow for
adjustments which likely can be made via regulatory changes.
NFU supports biofuel production as a Renewable Fuel
Standard. Ranchers understand that biofuels don't just help
corn farmers. The success of the ethanol industry helps the
rural economy as a whole. In 2006, when the RFS was enacted,
net farm income was $57 billion. In 2012, net farm income stood
at over $112 billion. Meat production has not declined
significantly since the enactment of the RFS, although there
have been downturns due to drought and livestock prices have
increased significantly.
Biofuels do not significantly drive up the price of food.
According to USDA, only 16 percent of grocery costs go back to
farmers and ranchers. And you can look at the attached Farmer's
Share Report that is in the testimony that we produce monthly
at our office using USDA statistics talking about the share of
the food dollar that goes back to the farmers. In fact, the
World Bank found that crude oil is the number one determinant
in global food prices, as you can see in Figure 4 of my
testimony. We should reduce our dependence on oil consumption
in order to become more food secure, and biofuel production is
an excellent way to do that.
On behalf of the National Farmers Union, thanks for the
opportunity to speak to you today. My full testimony including
our position on trade, foot-and-mouth disease, et cetera, is
included in the document before you. And I will be happy to
respond to questions.
[The prepared statement of Mr. Johnson follows:]
Prepared Statement of Roger Johnson, President, National Farmers Union,
Washington, D.C.
Introduction
On behalf of the family farmers, ranchers, fishermen and rural
members of National Farmers Union (NFU), thank you for the opportunity
to testify regarding the state of the livestock industry. NFU was
organized in 1902. We work to improve the well-being and quality of
life of family farmers, ranchers and rural communities by advocating
for grassroots-driven policy adopted annually by our membership. As a
general farm organization, we represent producers in all segments of
the livestock industry. This hearing is very important to our members
and the U.S. economy, as cash receipts to farmers and ranchers from the
sale of meat animals totaled $90.1 billion in 2012. Thus, it is
certainly wise for this Committee to regularly consider livestock
issues.
Decreasing market competition poses a threat to livestock
producers. Consumers are demanding significantly more accurate
information about the food they purchase and consume. Trade policy
changes present challenges and opportunities. Congress must carefully
consider all of these developments. It is important that this
Subcommittee provides oversight and sound policy that will foster
strong family farmers and ranchers and vibrant rural communities.
An Overview of the Livestock Industry
Although cattle prices have been high and feed prices have been low
in recent months, the profits from those market conditions are just now
beginning to have an effect on the expansion of the beef cattle
industry. This comes after a 7 year long slide, which has resulted in a
U.S. cattle herd that at the start of 2014 was the smallest since 1951:
87.7 million head, a two percent decline from the beginning of 2013
(Figure 1).
At the depth of the drought in September 2012, 58 percent of the
pastures and ranges in the U.S. were rated poor to very poor. By mid-
June 2013, the situation had improved so that less than \1/4\ of
pasture and rangeland were in drought conditions. As a result, cattle
feed supplies were limited, costs increased and total beef production
fell. As the beef supply declines, prices will likely remain strong and
feed prices are projected to remain low. The U.S. Department of
Agriculture (USDA) projects commercial cow slaughter in 2014 to be the
lowest since 2008.
Figure 1
Annual U.S. Livestock Herd Size, 1980-2014
Source: USDA.
Lower feed costs are also expected to result in increased pork
production over the next 10 years, although in the short term, USDA
projects porcine epidemic diarrhea virus (PEDv) will push pork
production down by about two percent in 2014 and has already reduced
the nation's pig population by ten percent. This issue is further
discussed later in the testimony. In contrast to beef, hog numbers have
remained stable to slightly increasing in recent years (Figure 1).
For lamb, prices remained at record-high levels throughout the
first few months of 2014. This price has weakened and USDA predicts a
decline as demand for lambs is expected to fall off. Despite this, a
tight supply will likely keep prices well above 2013 levels.
Concentration in the Livestock Industry
The livestock marketplace experienced a marked decline in the
number of family farms and ranches over the last 30 years. According to
the USDA National Agricultural Statistics Service, in 1980, there were
approximately 1,285,570 beef cattle operations across the country but
as of 2012, only 729,000 remained (Figure 2). This is a decline of
approximately 34 percent. In swine, the reduction has been even more
dramatic. In 1980, there were 666,550 hog farms but in 2012 there were
only about 60,200--a decline of 91 percent (Figure 2). Between the
losses of pork and beef operations, rural America has witnessed the
closure of about 1.1 million livestock farms in thirty years. As more
and more livestock operations have closed, concentration among
livestock sellers has become an increasingly important issue, not only
for producers, but also for rural communities and consumers.
Figure 2
Shrinking Number of Livestock Operations
Source: USDA.
As the number of livestock producers has shrunk, there are fewer
large buyers of livestock today than any other time in recent history.
Economists say an industry loses competitive character when the
concentration ratio of the top four firms (CR4) is 40 percent or
greater, and often very little competition remains if the CR4 exceeds
60 percent. According to studies by the University of Missouri, the top
four beef packers have control over 81 percent of the sales of cattle
for slaughter in the United States, and the top four swine processors
control about 65 percent of hog sales. Fewer buyers result in less
competition and greater opportunity for antitrust violations. These
trends underscore the need for USDA to even more carefully monitor
conditions in these highly concentrated industries to guard against
discriminatory or anti-competitive business practices.
Not coincidentally, the farmers' and ranchers' share of the
consumer retail dollar for purchases of meat is shrinking. In 1980 beef
producers received 62 percent of the retail dollar, according to USDA's
meat price spread calculations. That portion has fallen to about 42
percent today. Over the same time frame, hog producers saw their share
shrink from 50 percent of the retail dollar to about 24 percent. For
many years NFU has published ``the farmer's share of the food dollar''
for selected consumer products (Attachment 1), which underscores the
small percentage that farmers and ranchers receive across all segments
of agriculture.
The chart on the preceding page that illustrates the relatively
slight decline in the beef herd and consistency in the number of pigs
and hogs over the last 30 years shows that smaller producers have been
forced out of business. These statistics are a clear indication of the
scant market power of family farmers and ranchers in today's livestock
sector as consolidation is on the rise and competition is declining.
Enforcement of the Packers and Stockyards Act
Family farmers and ranchers routinely feel the negative effects of
a consolidated agricultural marketplace that too often fails to provide
a fair price. NFU has sought solutions to this problem since the
formation of our organization in 1902. For example, in 1956 NFU adopted
policy that asked Federal regulators to start ``a continuous
Congressional investigation into the widening spread between prices
received by farmers and those paid by consumers. If necessary,
regulatory measures should be instituted.'' In 1982 NFU policy urged
Congress to ``amend the Packers and Stockyards Act (PSA) to strengthen
its enforcement provisions, with effective penalties for violations.''
And in 1997 NFU's policy called for regulatory agencies with
``jurisdiction over the PSA'' to ``vigorously prosecute and break up
existing monopolistic entities, fully investigate all proposed mergers
in the livestock industry, and prevent further monopolistic
concentration with the use of effective penalties.'' Farmers and
ranchers need strong and continuous oversight of the livestock
marketplace.
Budget constraints and appropriations riders have made enforcement
of the PSA more difficult in recent years. In 2000 the Packers and
Stockyards Program of the USDA Grain Inspection, Packers and Stockyards
Administration (GIPSA) had 188 full-time employees who conducted and
completed a total of 579 investigations, which resulted in a total of
13 formal complaints decided by an administrative law judge. Last year
the program closed more than four times as many cases (2,335) as in
2000 and with only 147 full-time employees. An additional 133 cases
were closed and referred to the USDA's Office of the General Counsel,
and 12 more were closed after being referred to the U.S. Department of
Justice. What is not known, however, is if these cases were
satisfactorily resolved for farmers and ranchers or if the livestock
market is any more competitive as a result of these actions. NFU calls
on this Subcommittee to commission a study to determine the qualitative
results of the PSA and if current enforcement levels are ensuring a
competitive marketplace.
Given the greater consolidation in the marketplace outlined in the
previous section, it is clear that the work of GIPSA is more important
than ever before. The information collected during the joint hearings
held around the country in 2010 by USDA and the Department of Justice
demonstrated the need for antitrust investigations across all sectors
of agriculture. Further long-term cuts and prohibitions on GIPSA's
activities will impede the agency's ability to enforce the PSA and to
protect farmers and ranchers against abusive market practices. Instead,
Congress must allow GIPSA to do its job.
The 2014 Farm Bill allows GIPSA the authority to enforce certain
competition provisions. NFU appreciates the work of the Agriculture
Committees in reaching this decision. GIPSA will now be able to
prohibit deceptive or fraudulent buying practices by processors and may
protect farmers and ranchers if they have been harmed by unfair trade
practices. Appropriations riders over the last 3 years had kept GIPSA
from implementing these basic fairness rules. NFU recently sent a
letter (Attachment 2) to appropriators in both the House and Senate
demanding that any future riders that limit GIPSA's authority be
rejected.
Country-of-Origin Labeling
I commend Congress for maintaining current Country-of-Origin
Labeling (COOL) standards in the 2014 Farm Bill. Consumers want to know
more about the food they purchase, while U.S. farmers and ranchers are
proud of what they produce. A 2008 Consumer Reports poll found that 95
percent of consumers believe that processed or packaged food should be
labeled with the country of origin and that that information should
always be available at point of purchase. Now is not the time to deny
consumers vital information that will allow them to make informed
buying decisions and to remain confident in the integrity of our food
supply.
The 2002 Farm Bill required retailers to notify customers through
labeling of the source of nearly all muscle cuts and ground meat, along
with fish, fruits, vegetables, nuts and a variety of other generally
unprocessed products. For 5 years, appropriations riders prohibited the
implementation of COOL, which was again included in the 2008 Farm Bill.
After that show of Congressional support, COOL went into full effect in
2009. Canada and Mexico then brought forward a challenge in the World
Trade Organization (WTO) alleging that COOL did not comply with trade
agreements, despite the fact that Canada and at least 70 other WTO
countries have COOL requirements of their own. A WTO appellate body
found that, while the COOL statute itself complies with our trade
obligations and informing consumers about the origin of their food is a
legitimate objective, the way in which the COOL rule was originally
implemented did not achieve that goal.
In May 2013, in order to resolve the implementation issues that
arose in the WTO dispute, USDA enacted rules that require the labeling
of production steps--for example, ``Born, Raised, and Harvested in the
U.S.'' This modification addresses concerns brought forward by the
WTO's appellate body while providing consumers with enhanced
information that reduces confusion about the food they buy. The
inclusion of production steps does not require additional record-
keeping to transfer information from one marketing step to the next. A
lawsuit is now pending in U.S. court regarding implementation of the
new labels. Initial attempts to enjoin the new COOL requirements were
defeated, but the litigation continues.
The COOL rules, as enacted in 2013, are being enforced by USDA
through the Agriculture Marketing Service (AMS) Country of Origin
Labeling Division. The USDA has established cooperative agreements with
agencies, generally state departments of agriculture, in all 50 states.
These state-Federal partnerships are cost-effective and avoid
duplication by working with agencies that already conduct assessments
in retail store establishments, so that COOL surveillance activities
are a suitable addition to other retail responsibilities of the state
agency. According to USDA and state cooperators, 2,061 initial retail
reviews were completed last year, and at least 3,300 reviews are
planned for 2014. Retail stores have approximately 300 COOL-covered
commodity types available for sale on a given day and the overall
retail compliance is about 96 percent. Compliance in the supply chain
is also consistently favorable, averaging 97 percent since the
inception of the COOL final rule. COOL has been fully implemented and
is working as intended.
Meatpackers have complained that COOL would be expensive and cost
many workers their jobs: two claims that have not come true. COOL
opponents called the 2013 rules ``onerous, disruptive and expensive.''
These same groups commissioned studies in the last decade that claimed
COOL would cost upwards of $1.6 billion for the beef and pork
industries alone. These cost estimates proved to be vastly over-
inflated. A 2013 analysis by USDA found that changing COOL labels and
eliminating flexibility for meatpackers to commingle animals would cost
between $53.1 million to $137.8 million--far short of the unrealistic
predictions made by those fighting against COOL.
Ongoing proceedings at the World Trade Organization and in the U.S.
District Court for the District of Columbia have not found the COOL
statute and current implementation to be out of compliance. Even in the
event of a decision against COOL, the appeals process and compliance
period would allow for further consideration of regulatory adjustments
to COOL. NFU strongly opposes the use of an appropriations rider or
other legislative vehicle to deny consumers access to information about
their food. NFU expressed this view to House and Senate appropriators
in a letter (Attachment 2) last month.
Figure 3
A Compliant COOL Label, 2013
Renewable Fuel Standard
NFU is a general farm organization with a significant livestock
presence in many of our states. Despite the fact that many of our
members raise livestock, our organization is a strong supporter of
biofuel production and the Renewable Fuel Standard (RFS). Ranchers
understand that biofuels don't just help corn farmers--the success of
the ethanol industry helps the rural economy as a whole. According to
USDA, net farm income in the United States has risen significantly
since the passage of the RFS. Net farm income was $57.4 billion in 2006
and $112.8 billion in 2012. Within the livestock sector, meat
production has not declined significantly since the enactment of the
RFS. There was a slight downturn in beef production due to drought, but
the price received for livestock has increased since RFS enactment. The
ethanol industry also supports jobs in the rural economy. According to
a study by ABF Economics, the industry employs 386,781 Americans,
mostly in rural areas.
Some interest groups contend that biofuels drive up the price of
food. Our farmer and rancher members know that these groups would do
well to look elsewhere. As earlier stated, each month NFU releases its
``farmer's share of the food dollar'' report (Attachment 1), which
shows how much farmers and ranchers receive for each dollar of food
sold at the grocery store. Overall, farmers and ranchers receive only
15.8 of every food dollar. According to USDA, off-farm costs,
including marketing, processing, wholesaling, distribution and
retailing, account for more than 80 of every dollar spent on food in
the United States. Furthermore, only 16 percent of grocery costs can be
traced back to the price of farm inputs, like corn. Indeed, the World
Bank found that crude oil is the number one determinant of global food
prices (Figure 4). It seems logical, then, that the United States
should be working to reduce our nation's dependence on oil consumption
if it wants to become more food secure. Biofuel production is an
excellent way to offset oil consumption.
Figure 4
Price Indices: Food vs. Crude Oil
Source: The World Bank.
Animal Health Threats
NFU policy is clear regarding importation of livestock products
from countries that have a history of unresolved foot and mouth disease
(FMD). The following is an excerpt from the recently adopted grassroots
policy statement from NFU members:
``Livestock health is critical to production agriculture and
our nation's ability to provide a safe food supply. Achieving
the necessary means to ensure livestock health is a priority
for NFU. We support good animal husbandry practices as the
primary means of livestock health maintenance, as well as the
following initiatives to ensure livestock health:
Ban livestock, animal protein products and meat imports that
would jeopardize U.S. efforts to eradicate livestock diseases
including BSE and Foot and Mouth Disease (FMD);''
NFU strongly opposes the recent proposal from APHIS to resume
importation of fresh beef from 14 Brazilian states. FMD from that
region of Brazil still poses a significant threat to U.S. livestock
herds. Any changes to the current ban could pose substantial threats to
family farmers, ranchers and the general public due to the very real
possibility of transmission of FMD to U.S. livestock, resulting in
reduced consumer confidence in our food supply.
Inconsistencies between animal health disclosures reported by APHIS
and the World Organization for Animal Health (OIE) further erode NFU's
confidence in the safety of beef imports from countries with a history
of FMD presence and a poor food safety record. Vaccinations against FMD
are still occurring in the Brazilian states in question. In addition,
the U.S. Food and Drug Administration (FDA) recalled Brazilian cooked
and canned meat on three occasions in 2010 due to drug contamination.
The last case of FMD in the 14 state region in Brazil occurred in
2001. Even though the 14 Brazilian states in question are considered to
be ``FMD-free'' by the OIE, Brazil has not been able to prevent the
spread of FMD into its borders from neighboring countries, and as
recently as 2011, Paraguay reported two outbreaks of FMD within 250
miles of the Brazilian border.
In contrast, the United States has not had a confirmed case of FMD
since 1929 due to its effective disease prevention system and high food
safety standards. This reputation must not be put at risk. In the rare
instances when disease has impacted a portion of the livestock herd,
economic devastation has followed. When bovine spongiform
encephalopathy (BSE) was first identified in the United States in
December 2003, 65 of our trading partners eventually imposed partial or
full bans on U.S. beef. According to a Kansas State University study,
the U.S. beef industry lost between $2.9 billion and $4.2 billion in
2004 alone because of BSE. Rural America should not again be subjected
to severe losses simply because of lax standards for animal imports.
The economic costs of an FMD outbreak in the United States would be
enormous. A 2002 study conducted by Purdue University and the Centers
for Epidemiology and Animal Health at APHIS found that if an epidemic
similar to the outbreak that occurred in the UK in 2001 were to strike
the United States, a loss of $14 billion in U.S. farm income (in 2002
dollars) would result. This includes costs of quarantine and
eradication of animals, a ban on exports, and reduced consumer
confidence. In addition, the disease could spread to any cloven-hoofed
animals, endangering other domestic livestock like sheep or pigs, as
well as wild deer and antelope that form the basis of the U.S. hunting
industry.
There are very few positives associated with allowing livestock
products from regions of Brazil that are known to have a history of FMD
to be brought into our country, but many possible undesirable outcomes
from such an arrangement. Importing Brazilian beef and other livestock
products is a risk not worth taking.
Figure 5
PEDv Positive Biological Accessions
Cases per State
As of April 16, 2014.
Source: USDA APHIS Veterinary Services
The consequences of a wide-spread animal health outbreak are
beginning to be felt with a recent outbreak in the pork sector. The OIE
issued an alert on April 21, 2014, regarding the novel swine enteric
coronavirus (SECoV) that has emerged in the United States over the last
year. SECoV, which is thought to have originated in China, causes PEDV.
Recent reports from APHIS say there are now 5,978 cases of PEDV in 29
states (Figure 5). This underscores the importance of close monitoring
of animal disease outbreaks in order to safeguard the reputation and
integrity of U.S. animal agriculture.
Structure of the Beef Checkoff
Figure 6
USDA Commodity Checkoff Programs, as of 2014
Checkoff programs have served as an effective tool to promote the
consumption and research of commodity products. Twenty different
commodity checkoff programs collect funds, including beef, lamb and
pork. The checkoff assessment, paid by a farmer, rancher, grower or
processor at the point of sale, is a worthwhile investment if the
program is properly administered. The beef checkoff operates unlike
most of the other programs, in that it was specifically authorized by
an act of Congress with a complicated structure that allows for
significant involvement from policy organizations. Additionally, funds
for the beef checkoff have dwindled in recent years and there has been
talk of increasing the assessment on cattle sales.
Family farmers and ranchers need meaningful reform of the beef
checkoff that offers a governance structure that is more representative
of all livestock producers. The beef checkoff ought to function
separately from policy organizations in the way that other checkoff
programs operate. Producers must have confidence in the integrity of
the way in which their contributions to research and promotion
initiatives are spent. NFU will not support an increase in the beef
checkoff assessment until improvements are made to the structure and
oversight of the program.
The Impact of Trade on the Livestock Sector
NFU supports fair, mutually beneficial trade that seeks to increase
human welfare and respects sovereign nations' need for food and
national security. NFU has historically opposed free trade agreements
on the basis that the agreements were more likely to increase imports
rather than open new markets to U.S. goods, even for livestock and
agricultural products.
Free trade agreements are typically justified by claims that the
agreements will grant American producers access to previously closed
markets and thus create jobs. U.S. agriculture, including the livestock
sector, does have a history of generating a trade surplus (Figure 7).
Long-term agricultural surpluses have occurred because of our efficient
system and effective farm safety net.
Figure 7
Net U.S. Agricultural Trade with the World
Source: USDA Economic Research Service.
On the other hand, the U.S. economy as a whole has a history of
generating trade deficits (Figure 8). Free trade agreements have
worsened the situation by making American businesses compete with
countries that have lower environmental, health and food safety
standards. Furthermore, vague promises of market access are made to
U.S. trade stakeholders in order to encourage domestic support for a
trade deal. These promises are meaningless, however, when there are no
mechanisms to prevent countries from devaluing their currency, which
hurts U.S. exports and total trade balance.
Figure 8
Total U.S. Trade Deficit
Source: USDA Economic Research Service.
U.S. free trade agreements have a poor track record. During the
North American Free Trade Agreement (NAFTA) negotiations, for instance,
American farmers were promised increased market access in the form of
reduced tariffs on crops in Mexico. In reality, those tariff cut
benefits were eliminated when Mexico devalued the peso by 50 percent
shortly after NAFTA went into effect. Similarly, USDA analysts
predicted an increase in U.S. exports of beef products to Mexico. The
reality is that beef and pork, two projected NAFTA winners, saw their
exports to Mexico fall 13 percent and 20 percent, respectively, in the
3 years after NAFTA was implemented compared to the 3 years prior to
NAFTA. In the 20 years since the agreement, agricultural exports have
indeed increased to Canada and Mexico. But, agricultural imports from
these countries have increased even more, leading to an agricultural
trade deficit.
South Korea provides the most recent example of a country with
which the United States has a trade agreement. Proponents of the U.S.-
Korea FTA again promised increased market access for U.S. agricultural
products and increased exports. In reality, exports in agricultural
products dropped from around $6 billion in 2012, the year the agreement
went into effect, to around $5 billion in 2013, according to the
National Agricultural Statistics Service.
The International Trade Commission estimated that the U.S. goods
trade balance with South Korea would improve by $3.3 billion to $4
billion. Since the FTA went into force, however, U.S. goods trade
balance has decreased by around $4 billion. U.S. total trade deficit
with South Korea also increased from $8.7 billion in 2012 to $10.6
billion in 2013. Unfortunately, the promised increases in agricultural
exports did not take into consideration the effect of a Korean
devaluation of its currency, which wipes out any gains made by reduced
tariffs. In a recent report, the Peterson Institute for International
Economics lists South Korea as one of the eight worst currency
manipulators. It goes on to say that foreign currency manipulation is
responsible for a $200 billion to $500 billion per year increase in
account deficits, and attributes between one million and five million
job losses to foreign currency manipulation. It is therefore vital that
there be safeguards in place in any trade agreement that counteract
currency manipulation by foreign governments.
On the whole, U.S. agriculture has actually done worse after
entering into FTAs. The chart below (Figure 9) shows the net
agriculture trade surplus (deficit) with countries that have entered
into trade agreements with the United States. Each year only includes
trade data from countries with which the United States had an FTA in
that year. This subpar performance contrasts with U.S. agriculture's
performance as a whole.
Figure 9
Net Ag Trade among Countries with U.S. FTA
Source: International Trade Commission Figures, Global Trade
Watch Calculations.
Livestock Marketing Improvement Efforts
With the growth in local and regional food markets in recent years,
greater information and communication is needed for farmers and
ranchers to better understand the economic conditions in which they are
operating. Over the last year, USDA's Market News released 30 new
reports to better serve the agriculture industry, including livestock.
Market News will add ``local'' as an element to current retail reports,
which is similar to the way in which organic commodities were recently
added. Additionally, AMS began publishing a Market News report covering
the grass fed beef industry. These reports provide timely information
to assist in marketing decisions and help small and local livestock
producers to plan for the future.
The Grass Fed Verification program for Small and Very Small
Producers (SVS) is another noteworthy new marketing initiative. This
program provides verification assistance to those farmers and ranchers
who market fewer than 50 cattle each year. This segment of producers
accounts for 11.5 percent of the total number of cattle and calf
operations but has been previously under-served by AMS certification
processes. This is a welcome improvement that will help an emerging
segment of tomorrow's diversified livestock industry.
Conclusion
NFU's policy statement, which is revised and adopted each year
through a grassroots process among Farmers Union members at all levels,
includes a section on ``national food and fiber policy.'' The following
excerpt from the 2014 NFU policy statement provides a clear goal for
what this Subcommittee and Congress as a whole ought to do in order to
provide for a strong livestock and family farm economy:
``The decline in the number of family-sized commercial farms
must be reversed. Programs that encourage sustainable
agriculture through diversified production, improved marketing
strategies, and enhanced value-added opportunities can be keys
to reversing this trend . . . Farmers and consumers need
stability and fairness in a farm program. Farmers, rural
communities and consumers are at the mercy of a marketplace
that is increasingly dominated by vertically integrated,
multinational grain and food conglomerates.''
Reliable access to accurate information is essential to providing
farmers, ranchers and consumers a level playing field. Consumers ought
to know where their food comes from and individual producers need to
know the prevailing market trends and prices. Furthermore, regulators
must oversee and prohibit anti-competitive behavior by the most
powerful companies and interests. Budding sectors of the agriculture
economy, including small livestock production and biofuels, should be
strongly supported in their development. Trade negotiators must keep
the well-being of farmers, ranchers and consumers in mind, and animal
health import restrictions should not be relaxed simply to please
foreign trading partners.
I look forward to working with the House Agriculture Subcommittee
on Livestock, Rural Development and Credit to achieve these goals.
Thank you for your consideration and the opportunity to testify today.
Attachment 1
Attachment 2
March 20, 2014
Testimony of Roger Johnson, President, National Farmers Union To the
House Agriculture Appropriations Subcommittee Regarding Fiscal
Year 2015 Funding for Agricultural Programs
Contact: Mike Stranz, Senior Government Relations Representative
([email protected])
On behalf of the family farmer and rancher members of National
Farmers Union (NFU), thank you for the opportunity to present funding
requests for Fiscal Year 2015. As a general farm organization, NFU has
a broad array of interests in the agricultural appropriations process.
This letter enumerates a few of the highest priorities for our members.
Additionally, the recent passage of the 2014 Farm Bill deserves the
attention of the Subcommittee. We ask that programs that were granted
discretionary funding through the farm bill receive their full
appropriations, and that the Subcommittee not reduce other program
funding through changes in mandatory programs.
Agency: USDA Agricultural Marketing Service (AMS)
Request: No legislative riders or targeted funding reductions to
limit or restrict the enforcement, legal defense or study of Country-
of-Origin Labeling (COOL).
The 2008 Farm Bill requires retailers to notify customers through
labeling of the source of nearly all muscle cuts and ground meat, along
with fish, fruits, vegetables, nuts and a variety of other generally
unprocessed products. As of 2013, the U.S. Department of Agriculture
(USDA) enacted rules that require the labeling of production steps--for
example, ``Born, Raised, and Harvested in the U.S.''--as directed by a
World Trade Organization (WTO) dispute. Another WTO proceeding is
currently under way to review the new COOL regulations' compliance with
trade laws, and a lawsuit is pending in U.S. court regarding
implementation of the new labels. Additionally, the 2014 Farm Bill
requires a study on the economic impact of COOL.
NFU opposes any funding cuts or legislative riders that would
circumvent enforcement, implementation, legal defense or study of COOL.
Studies have found that more than 90 percent of consumers support COOL.
Any threats of retaliation from Canada and Mexico are extremely
premature, as WTO appeals are slow moving and typically last for years.
Agency: USDA Grain Inspection, Packers and Stockyards
Administration (GIPSA)
Request: No legislative riders to limit or restrict the USDA's
rulemaking and enforcement authority under the Packers and Stockyards
Act of 1921.
Because of appropriations riders in the last 3 years, USDA has not
been allowed to write rules that would provide greater fairness for
livestock sellers and poultry growers in the agriculture marketplace,
as directed by the 2008 Farm Bill. This includes prohibiting deceptive
or fraudulent buying practices and permitting farmers and ranchers to
seek protection under the Packers and Stockyards Act if they have been
harmed by unfair trade practices.
While the last three legislative riders on GIPSA have varied, they
each have significantly undermined important protections for livestock
and poultry ranchers and growers. These provisions must not be
prevented; thus, NFU strongly urges the Subcommittee to reject any
legislative riders that would undermine GIPSA's authority and ignore
Congressional intent.
Agency: Agriculture and Food Research Initiative (AFRI)
Request: Report language on public cultivar development.
The 2008 Farm Bill created the Agriculture and Food Research
Initiative (AFRI), which called for AFRI to make ``conventional'' plant
and animal breeding a priority for research grants. Implementation of
these directives has been slow. NFU asks that the FY 2015
appropriations bill include report language that reiterates the need to
prioritize funding for classical plant and animal breeding within the
AFRI process.
Agency: Agriculture Research Service (ARS)--Genetic Improvement and
Translational Breeding Initiative
Request: $25.9 million with report language directing funds to the
development and release of regionally adapted, public cultivars.
The Administration's FY 2015 budget requests $25.9 million for a
new Genetic Improvement and Translational Breeding Initiative to be
administered by ARS. Given the huge private and public investment in
genomics and the lack of funding for classical breeding for public
cultivar development, clear language ought to be included to direct ARS
to focus all of the funding provided for this initiative on the
development and release of regionally adapted, publicly held, cultivars
to benefit farmers and ranchers across the country.
Agency: USDA Rural Development
Request: Fully fund farm bill energy title programs at
discretionary funding levels and do not reduce program funding through
changes in mandatory programs. Also, allow 2014 Biomass Crop Assistance
Program (BCAP) funds to carry over into 2015 if they are not expended.
The 2014 Farm Bill makes substantial investments in existing energy
programs such as the Rural Energy for America Program (REAP), Biomass
Crop Assistance Program (BCAP), and Biorefinery Assistance Program
(BAP). NFU asks that the Subcommittee not reduce any of the funds
allocated to these programs. In addition, because USDA may not expend
all funds for BCAP in 2014, NFU asks that language be inserted allowing
for unexpended 2014 BCAP funds to be carried over into 2015.
Thank you for your consideration of these requests.
The Chairman. Thank you, Mr. Johnson.
I will now move to Mr. Miller with Tyson Foods. Mr. Miller,
you are recognized for 5 minutes.
STATEMENT OF SHANE MILLER, SENIOR VICE PRESIDENT, PORK MARGIN
MANAGEMENT, TYSON FRESH MEATS,
DAKOTA DUNES, SD
Mr. Miller. Mr. Chairman, Members of the Committee, it is
truly an honor to be here to represent Tyson Foods. We are
proud to be an American-owned company from the heartland,
employing over 115,000 people worldwide: 100,000 of those
individuals are working right here in the United States. We
process chicken, beef and pork, and a wide variety of prepared
foods like pizza toppings, soups and tortillas.
We have grown to be one of the largest meat companies in
the world, and every day we work closely with American farmers
to help feed the world. In fact, in Fiscal Year 2013, we paid
more than $15 billion to over 11,000 farmers and ranchers.
While we are certainly focused on the domestic market as you
all well know, international trade is extremely important to
our industry and to our business at Tyson Foods. In fact, it is
worth noting, USDA concluded that 1.2 million American jobs are
produced by exporting animal protein.
Protein consumption is rapidly increasing worldwide as
living standards rise in many countries. The U.S. livestock and
poultry industry is positioned extremely well to serve these
new markets. Just underlining this point, last year 16 percent
of Tyson's beef sales were international, 22 percent were pork
sales from exports, and about \1/5\ of our chicken sales went
to overseas markets. We expect those percentages to continue
growing.
With that introduction, I will take a few moments to talk
about the state of the meat and poultry industry from our
perspective. These are challenging, exciting times for our
industry, headlined by near-record prices. Let me first start
with beef. We have seen some consumer shift from beef to
chicken because of rising beef prices in the last year. This is
largely due to a lack of supply.
As we all know, the beef herd in the U.S. is at one of its
lowest points in decades and it will likely take years to
recover. The drought in major cattle-growing areas has been a
major factor in this shrinking supply. Federal biofuels
policies have also encouraged the diversion of corn away from
feed into ethanol which has led to periods of tighter supply
and price of volatility.
These pressures on the beef industry, along with others
outlined in my written testimony, have been made even more
difficult by the recent mandatory Country-of-Origin Labeling
program. This new regulation is just simply bad for our
consumers, bad for our business and bad for family farmers in
general.
The new rule imposes serious costs and takes away the
flexibility to commingle cattle sourced from either Canada or
Mexico; yet, it doesn't resolve the challenge by Mexico and
Canada at the WTO. This could result in retaliatory tariffs on
a wide range of U.S. products, including beef, pork and
poultry. We urge this Committee and we urge Congress to address
the MCOOL issue and implement a policy that both supports an
efficient and expanding U.S. beef industry and heads off
potentially damaging tariffs on the livestock and poultry
industries.
Moving to pork: The sector has been affected by the Porcine
Epidemic Diarrhea virus, PEDv, and quite frankly has devastated
progress for many family farmers across the country. We have
estimated that the virus will impact domestic hog supplies by
two to four percent this fiscal year, with the biggest and
largest impact coming in the summer months where it could be
quite a bit more extreme due to the timing of the year.
As I have said before, we work closely with family farmers
who supply us, and while the industry will get through this
tough period, there will no doubt be an impact on supply as we
go forward. The good news is that we are seeing higher demand
for pork products; in fact, domestic and international sales
have increased, and we expect that trend to continue in the
coming years.
Last, chicken is in high demand and we believe that will
continue during the remainder of the year. As we look ahead, we
expect chicken supply to respond to rising demand over the next
year. That means chicken is positioned to do very well both
domestically and internationally.
To conclude, while there are many things outside of our
control, there are a number of policy considerations that
impact the livestock and poultry industries. Most important
among these today are international trade and damaging
provisions like the new MCOOL regulations.
The U.S. meat and poultry industry is truly world class,
and I urge this Committee to help us grow our businesses by
promoting expanded trade as well as reforming policies that
restrict our ability to operate fairly and efficiently so that
we can continue to provide jobs for thousands of Americans
across this great country.
Thank you again to the Committee for giving me the chance
to be here today, I will take any questions that you may have.
[The prepared statement of Mr. Miller follows:]
Prepared Statement of Shane Miller, Senior Vice President, Pork Margin
Management, Tyson Fresh Meats, Dakota Dunes, SD
Mr. Chairman and Members of the Committee, I am pleased to have
this opportunity to discuss the state of the livestock and poultry
industries on behalf of Tyson Foods, Inc. Like so many of the companies
and producers represented here on this panel today, Tyson is proud to
provide safe, affordable and nutritious food to millions of families
across this country and around the globe. My testimony today will
provide my company's general view of the pork, beef and chicken
sectors, as well as highlight a few issues we believe are worthy of
this Committee's attention. Since I am joined today by many of the
major livestock and poultry associations, I will leave it to my
colleagues to provide a more in-depth analysis of their particular
sectors.
Background on Tyson Foods, Inc.
Tyson Foods, Inc. is one of the world's largest processors and
marketers of chicken, beef and pork with FY13 sales of $34.4 billion
and operations in 27 U.S. states. Utilizing a multi-protein business
model, our over 100,000 Team Members produce about one of every 5
pounds of chicken, beef and pork in the United States along with a wide
variety of prepared foods, such as pizza toppings, tortillas and soups.
Tyson is a proud partner with America's farm families; in FY13 we
paid more than $15 billion in revenue to thousands of independent
farmers across 39 states who supply us with livestock and production
services. Like others in the industry, Tyson is vertically integrated
in its chicken business, but acquires its pork and beef through
negotiated purchases using a variety of methods. We value and rely upon
these relationships, many of which span multiple generations.
While the vast majority of our operations are U.S. based, Tyson
also maintains in-country poultry operations in China, India, Mexico
and Brazil. These international locations service that particular
country's domestic population, and in some cases, also serve as
platforms for export to key international markets. As this Committee
understands well, international trade is critically important to the
livestock and poultry industries. Tyson currently exports frozen,
chilled and prepared products to approximately 130 countries.
Finally, in keeping with Tyson's Core Values, we strive to be a
responsible member of our communities through charitable donations,
public service and volunteer work. Tyson Team Members routinely support
a variety of worthy causes with their time and financial support. Our
company's signature philanthropic effort is hunger relief. At Tyson, we
believe that hunger and food insecurity are issues that no family
should experience. Over the past 15 years, Tyson has donated nearly 100
million pounds of food to national hunger relief organizations in the
United States.
I will now provide Tyson's perspective on the state of the pork,
beef and chicken sectors, with attention to some key issues that could
impact future success.
State of Our Industry
Overview
At Tyson, we believe this both a challenging and exciting time to
be in the protein business. Based upon low supplies of live cattle and
hogs, along with relatively high grain costs, we are seeing near record
retail prices for beef, pork and chicken; with chicken poised to
benefit in the near term as the least-cost option. However, in spite of
historically high prices, we have also seen resilient consumer demand
for protein. According to Nielsen data for 2013, total fresh meat
volume at retail was up 1.3%. Based on the data we have available so
far in 2014, we see demand for meat remaining high as consumer
confidence continues to rebound.
As consumers become less defensive in their spending habits, we are
also seeing changes in their expectations. In addition to price,
consumers are increasingly focused on ingredients, freshness and
transparency in our processes. They are also asking--Is this product
good for me? In our view, these factors are all a part of the
consumers' new value equation. This is certainly a challenge for all of
us in the food business, but also an opportunity if we can meet these
evolving customer demands.
While we are keenly focused on the U.S. market, export markets are
of growing importance. Each year, our international sales increase in
value to our company, reflecting the reality that the future growth in
protein demand lays outside the U.S. This is why International Trade is
the first issue I want to underscore for this Committee. Although we
have seen impressive export gains in recent years, we are also facing
new trade barriers on a seemingly daily basis in key export markets
like China and Russia. Many of these barriers are counter to sound
science and contrary to accepted international standards.
In addition to these challenges, we are also at a key juncture with
regard to major trade agreements including the Trans-Pacific
Partnership (TPP). The TPP holds great promise for livestock and
poultry, but only if Japan and other participants agree to significant
tariff reductions as part of the agreement. The U.S. must also avoid
taking actions of its own that invite trade retaliation. One example is
the ongoing challenge of our Country-of-Origin Labeling rules at the
World Trade Organization (WTO), which could result in a damaging
disruption to trade. I will discuss this issue later in my testimony.
Taken as a whole, we believe the picture for the protein sector is
a positive one. Although customer expectations are evolving, the demand
for our products remains strong and there is also room for growth,
particularly in the areas of value-added and convenience. Demand is
also strong among international consumers, but we have significant
challenges to overcome in order to maximize our export potential. I
will now share our perspectives on the pork, beef and chicken sectors
in a little more depth.
Pork
It is appropriate to start any discussion about the pork sector by
addressing the Porcine Epidemic Diarrhea (PED) virus, which has been a
devastating development for so many farm families. At Tyson, we
purchase about 97 percent of our hogs from independent producers. We
value our partnership with these producers and believe they are the
best in the world at what they do. We will get through this difficult
period but there is no doubt that it will have an impact on supply.
We have estimated that the PED virus will impact domestic hog
supplies by 2-4 percent this fiscal year, with the biggest impact
coming in the summer months. We are working closely with our producers
to make sure that we can maximize our supply in the months ahead in
order to operate our plants efficiently. We anticipate that heavier
weights on hogs can offset some of the headcount reductions, but
clearly we could see some supply issues. We are also working with our
customers to set expectations on which items could be most affected by
a reduced supply in the months ahead.
Looking at the big picture for pork, we have continued to see
increased consumer demand for pork products, and in fact, Tyson's FY
2014 First Quarter (Tyson operates on a September 30 fiscal year) pork
sales were our second highest First Quarter sales in that category
ever. We were also above our normalized range for return on sales for
pork during the First Quarter. Although exports were down a little last
year compared with 2012, U.S. pork exports have grown significantly
over the last few decades and there are still tremendous opportunities
to increase our international sales in the coming years.
Beef
The record high wholesale beef prices we have seen so far in 2014
are largely a function of supply. As this Committee is aware, the U.S.
beef herd is at one of its lowest points in decades and it will take
years for the herd to fully recover. The sustained drought in many key
cattlegrowing areas like Oklahoma and Texas has been a major factor in
herd decline. The drought's impact has also been exacerbated by Federal
biofuels policies that encourage the diversion of corn away from feed
and into ethanol, leading to periods of tight supply and price
volatility.
Although market conditions suggest that this should be a period of
heifer retention and herd rebuilding, we are not yet seeing that play
out in cattle growing areas, particularly where drought is still a
factor. Until we see the beef herd increase, beef processors with
plants in close proximity to areas where cattle are the most plentiful
will be in a position to operate most efficiently. Facilities with less
access will be more negatively impacted. We have observed this within
our own beef business. Prices will also continue to remain high until
demand starts to decline. We are already starting to see some demand
shift this year as consumers move from beef to chicken.
Given the market pressures already impacting the beef sector, I
want to highlight a second issue that I know many on this Committee
have an interest in--the recent changes to the Mandatory Country-of-
Origin Labeling (MCOOL) program. I will not restate the history on this
issue, but it is very unfortunate that the United States Department of
Agriculture decided to impose significant costs and inefficiencies on
the livestock and poultry industries in response to the previous COOL
regulation's defeat at the World Trade Organization (WTO) in 2012.
While the 2009 COOL regulation imposed costs on our industry, it
did allow beef processors, particularly those operating on the northern
and southern borders, the flexibility to commingle cattle sourced from
Canada or Mexico. This new regulation not only imposes new labeling and
administrative costs, but also takes away the ability to commingle
cattle, forcing segregation at the plant. As previously discussed, we
are working very hard to operate as efficiently as possible in the face
of a reduced U.S. cattle herd.
To make matters worse, the new MCOOL regulation did not resolve the
challenge by Canada and Mexico at the WTO. Both countries are very
opposed to these changes and a WTO panel is now reviewing whether or
not the U.S. has come into compliance as directed by the 2012 WTO
ruling. If the U.S. loses, the ultimate outcome will be retaliatory
tariffs from Canada and Mexico on a wide range of U.S. products,
including livestock and poultry products.
We would urge this Committee and the Congress to address the MCOOL
issue and implement a policy that both supports an efficient and
expanding U.S. beef industry and heads off potentially damaging
retaliatory tariffs on the livestock and poultry industries.
Chicken
Given the market conditions that I have outlined already in my
testimony, it is no surprise that chicken is currently in a strong
position. While chicken prices have gone up, it is in a beneficial
position as the less-expensive protein, a factor that is fueling demand
among consumers. At Tyson, our chicken business performed well during
the First Quarter of FY 2014 and overall we anticipate a very strong
year for chicken.
Looking ahead, we do expect chicken supply to respond to rising
demand and increase somewhat during the remainder of the year. However,
in our view this increase will in part be offset by rising demand, as
consumers continue to shift away from beef and pork in favor of
chicken. Our President and Chief Executive Officer, Donnie Smith, has
publicly predicted that we will not see a ``meaningful change'' in bird
production until the second half of 2015.
While this is a positive time for the chicken industry, a number of
policy issues could have an impact. We need to stay focused on opening
new international markets for chicken products through both bilateral
discussions and major trade agreements like the TPP. Our potential in
China, a key market, continues to be limited by unjustified dumping and
countervailing duties on U.S. chicken products, as well as other non-
tariff trade barriers. As previously stated, we also remain concerned
with Federal biofuels policies that can lead to tight supplies and
price spikes on corns and other feed grains. This has imposed
significant costs on the poultry industry since 2008.
A final issue, which extends to all of livestock and poultry,
concerns the 2010 proposed regulations to the Grain Inspection and
Packers Stockyards Administration (GIPSA). As this Committee is aware,
while these proposed regulations were supposed to be a response to
Congress' specific direction in the 2008 Farm Bill, the actual
regulations went far beyond the scope authorized by the farm bill. If
implemented, these regulations would force unnecessary and costly
changes to the way processors and growers do business. We are grateful
that Congress has consistently chosen to block implementation of these
unnecessary regulations through the appropriations process. We urge
this Committee to take the lead in advancing a permanent resolution to
this issue as soon as practical.
Conclusion
In Tyson's view, this is an exciting time to be in the business and
although there are certainly challenges, we believe many opportunities
lay ahead. We are seeing continued demand for our products among U.S.
consumers and growing demand abroad, in our view that is a very
positive thing for the livestock and poultry industries.
While many market developments are outside of all our control,
there are a number of policy considerations within this Committee's
area of concern that can impact livestock and poultry. As I have
discussed in my testimony, chief among these are international trade
and damaging provisions like the new MCOOL regulations and pending
GIPSA regulations. I urge the Committee to focus on initiatives that
will increase market opportunities for livestock and poultry, as well
as reforming policies that restrict our ability to operate fairly and
efficiently.
I want to again thank this Committee for the chance to appear
before you today and discuss the state of the livestock and poultry
industries.
The Chairman. Thank you, Mr. Miller.
We will now move to Dr. Hill, National Pork Producers
Council. You are recognized for 5 minutes.
STATEMENT OF HOWARD HILL, D.V.M., PRESIDENT, NATIONAL PORK
PRODUCERS COUNCIL, CAMBRIDGE, IA
Dr. Hill. Thank you, Chairman Crawford and Ranking Member
Costa for inviting me to testify at this very important
hearing.
I am Dr. Howard Hill, veterinarian and a hog farmer from
Iowa, and I currently serve as the President of the National
Pork Producers Council. I apologize for Dr. Steve Meyer not
being here today as originally planned. I think you would
agree, though, that a veterinarian beats an economist any day
of the week.
NPPC has an association of 44 state organizations that
serves as a voice in Washington for America's 69,000 pork
producers. Last year those producers marketed more than 111
million hogs which provided 23 billion pounds of safe,
nutritious pork to the world, generated gross receipts of $15
billion and personal income of $21 billion and added $35
billion to our Gross National Product.
The United States exported more than $6 billion of pork in
2013 which added about $54 to the price producers receive for
each hog marketed. The U.S. pork industry is responsible for
more than 550,000 mostly rural jobs in the United States. But
all of those positive numbers could change because of a couple
issues now facing the pork producers.
First, U.S. market hog production declined because of a
sharp reduction in the number of weaners and feeder pigs
imported from Canada, mostly because of implementation of the
Federal MCOOL law. Although the MCOOL officially began in
September 2009, it caused adjustments in Canadian hog outputs
well before that date because U.S. farmers finishing hogs
sought domestic animals to avoid the cost and complications of
the new law such as the prohibition on commingling U.S. born
and Canadian-born hogs.
The U.S. slaughter of Canadian hogs fell by nearly 50
percent because of MCOOL driven decline and Canadian hogs
shipped directly to the U.S. for slaughter. One result of the
decline in Canadian hogs was the April 10 closure of the John
Morrell plant in Sioux City, Iowa. There simply weren't enough
hogs available nor sent to the United States to maintain the
pre-2010 level of packing capacity. The closure cost 1,500
jobs.
In addition to the direct economic impact of MCOOL, the
U.S. pork industry may have retaliatory tariffs imposed on its
products and on a host of other goods if Canada and Mexico win
their case against the law which now is pending in the WTO.
While tariffs may not trigger another recession, they would
damage the economy and hurt the many hardworking families that
depend on trade with Canada and Mexico for their livelihood.
The most pressing threat we face, however, is Porcine
Epidemic Diarrhea virus or PEDv which now has spread to 30
states. While USDA estimates the disease has killed about two
million pigs, the economist Dr. Steve Meyer estimates a loss
closer to seven million pigs. That suggests slaughter
reductions this summer could be greater then ten percent. Such
reduction would push U.S. hog prices up by 15 to 25 percent and
force consumer-level pork prices up 10 to 12 percent. Retail
pork prices already have hit new record highs in March and most
likely will rise even higher this summer and fall.
Even though a reduced supply may increase pork prices for
farmers, I know firsthand that pork producers are not happy
about this disease. Producers talk about their PEDv experience
using terms such as devastating, heartbreaking, gut wrenching,
when describing its impact on their herds, themselves, their
families and their employees.
Additionally, reduced hog numbers mean less feed, less
medicine, fewer veterinary services and shorter hours at
packing and processing plants. All these dynamics reduce wages
and profits generated by allied businesses. Since many of these
businesses are located in small and mid-sized rural
communities, this would have a significant negative impact on
the nation's rural economy.
So what needs to be done about PEDv? First, it is still not
known how PEDv entered the United States. The pork industry has
evidence that two distinct strains of PEDv were introduced
along with another virus called Porcine Deltacoronavirus. The
pork industry needs USDA to conduct a thorough investigation on
the pathway these viruses used to gain entry into the United
States, swine herd. The agency should cooperate with FDA, DHS
and other appropriate agencies in this investigation.
While the U.S. pork industry has committed nearly $2
million of research for PEDv, it would like USDA's ARS to bring
significant resources to bear on the disease. This research
needs to focus on basic viral propagation, pathogenesis and
control. Development of a vaccine is only one of several
important tools to get PEDv under control.
The pork industry also needs the National Animal Health
Laboratory Network to have the ability to efficiently and
electronically communicate and generate the data needed to
understand and respond to PEDv and Deltacoronavirus. The
information also should be available for real-time appropriate
analysis.
Additionally, USDA's ability to implement or coordinate its
surveillance program should be enhanced. Recently, Secretary
Vilsack announced an order to require reporting of PEDv. While
knowledge of the disease prevalence and movement are important
in understanding the epidemiology disease, USDA needs to take a
thoughtful and measured approach to development of a strategic
strategy that is practical, workable and can be successful. The
pork industry is willing to work with USDA.
Thank you again for the opportunity to discuss the
challenges facing today's pork industry, and I would be glad to
answer any questions posed by the Committee.
[The prepared statement of Dr. Hill follows:]
Prepared Statement of Howard Hill, D.V.M., President, National Pork
Producers Council, Cambridge, IA
State of the U.S. Pork Industry
Introduction
The National Pork Producers Council (NPPC) is an association of 44
state pork producer organizations that serves as the voice in
Washington for the nation's pork producers. The U.S. pork industry
represents a significant value-added activity in the agriculture
economy and the overall U.S. economy. Nationwide, more than 69,000 pork
producers marketed more than 111 million hogs in 2013, and those
animals provided total gross receipts of $15 billion. Overall, an
estimated $21 billion of personal income and $35 billion of Gross
National Product are supported by the U.S. hog industry. Economists Dan
Otto and John Lawrence at Iowa State University estimate that the U.S.
pork industry is directly responsible for the creation of nearly 35,000
full-time equivalent pork producing jobs and generates about 128,000
jobs in the rest of agriculture. It is responsible for approximately
111,000 jobs in the manufacturing sector, mostly in the packing
industry, and 65,000 jobs in professional services such as
veterinarians, real estate agents and bankers. All told, the U.S. pork
industry is responsible for more than 550,000 mostly rural jobs in the
United States.
Exports of pork continue to grow. New technologies have been
adopted and productivity has been increased to maintain the U.S. pork
industry's international competitiveness. As a result, pork exports
have hit new records for 20 of the past 22 years. In 2013, the United
States exported more than $6 billion of pork, which added about $54 to
the price that producers received for each hog marketed. Net exports
last year represented almost 26 percent of pork production. The U.S.
pork industry today provides 23 billion pounds of safe, wholesome and
nutritious meat protein to consumers worldwide.
A Permanent Shift for Costs, Lower Numbers of Canadian Pigs
At beginning of 2014, the U.S. pork industry had lost money in four
of the past years, including 2 of the 3 worst years on record in 2008
and 2009. After some recovery in 2010 and 2011, record-high feed costs
in 2012 and early 2013 pushed producers' cumulative profits to their
lowest point since late 2004. Now porcine epidemic diarrhea virus
(PEDv) and potential trade actions by two of our largest export markets
have cast a cloud over the industry.
The losses incurred since 2007 began with the initial run-up of
feed ingredient prices that resulted from rapidly rising ethanol
production capacity. That capacity development was hastened by Federal
biofuels policy that included rising levels of mandated ethanol usage.
Break-even hog production costs rose to a then-record $57 per hundred
pounds (cwt.) of carcass weight--live $76/cwt.--in 2008 as corn prices
hit then-record highs. Those high costs of production were complicated
for producers by record-high hog supplies in 2008, the result of slight
breeding herd growth and the 2007 introduction of circovirus vaccines
that allowed many more pigs to survive to market age and weight. Doing
what was clearly the right thing for animals' well-being had
significant negative economic consequences for producers.
The losses of 2008 and 2009 led to a significant reduction in U.S.
hog slaughter in subsequent years. Part of that decline in numbers was
because of a liquidation of part of the U.S. breeding herd because of
financial losses. The U.S. breeding herd fell by 455,000 head (7.3
percent) from December 2007 through December 2010, and, despite rapidly
rising productivity, the U.S. pig crop declined from a record-high 115
million head in 2008 to just 113.7 million in 2010.
At the same time, U.S. market hog production declined because of a
sharp reduction in the number of weaner and feeder pigs imported from
Canada, which fell from just over seven million head in 2008 to just
4.7 million head in 2010. That decline was driven by two factors whose
relative importance is very difficult to determine.
First, the value of the Canadian dollar relative to the U.S. dollar
increased sharply, making Canadian producers less competitive with
their U.S. counterparts. That factor plus the same higher feed costs
faced by U.S. producers caused Canadian hog numbers to decline. Fewer
hogs in Canada left fewer pigs to be exported to the United States.
The second factor was mandatory Country-of-Origin Labeling, or
MCOOL. Though the program began officially in September 2009, it caused
adjustments in Canadian output well before that date as U.S. hog
finishers sought domestic sources of feeder pigs to avoid the costs and
complications of feeding and marketing Canadian pigs, which most
expected and eventually realized.
Finally, U.S. hog slaughter also was reduced because of an MCOOL-
driven decline in Canadian hogs shipped directly to the United States
for slaughter. Those numbers fell from 3.28 million in 2008 to just
1.14 million in 2010, and those hogs, in particular, were affected by
MCOOL since the product from them was required to be completely
segregated from product derived from pigs fed in the United States.
Total U.S. commercial hog slaughter fell by 6.193 million head (5.3
percent) from 2008 to 2010 because of these various reductions in the
number of hogs available to U.S. packers. A primary and completely
foreseen consequence of these lower hog numbers was a reduction in
total U.S. pork packing capacity. That consequence was realized in
April 2010 with the closure of the John Morrell plant in Sioux City,
Iowa. The plant had long been considered vulnerable because of its lack
of further-processing facilities and downtown location near the former
site of the Sioux City Stockyards, which closed in 2002. It was
particularly vulnerable to MCOOL-related reductions in Canadian imports
because of it being one of the northernmost and westernmost plants in
the United States. Its sister plant in Sioux Falls, SD, processed a
significant number of imported Canadian market hogs and U.S. market
hogs produced from Canadian-born pigs. When the number of those pigs
declined, there simply were not enough hogs available in the North-
Central United States to maintain the pre-2010 level of packing
capacity. The closure cost 1,500 jobs.
That reduction of capacity remains a potential limiting factor for
the U.S. pork industry today. The high feed prices of 2012-2013 and,
now, PEDv have reduced U.S. hog numbers enough that the current total
capacity of 444,320 head per day will not be challenged either this
year or next. But the United States is the world's low-cost producer of
finished pork products, meaning that there is ample potential for long-
run growth. A return of market hog numbers to the level of 2008 would
result in weekly slaughter numbers that exceed the nation's MCOOL-
reduced packing capacity. Should that happen, very low hog prices would
result.
Clock Runs Out On U.S. Crop Weather in 2012
Two years of marginal profitability in 2010 and 2011 were followed
by another period of losses, this time driven by the first significant
drought to hit the Cornbelt since 1988. The combination of sharply
lower corn and soybean yields and very low corn and soybean reserves
pushed prices and hog feed costs to new record highs. The average
break-even cost for Iowa farrow-to-finish operations modeled by Iowa
State University hit $90.89/cwt carcass in 2012 and $93.95/cwt. carcass
in 2013. Those compare with $52.76/cwt. from 1999-2006 before the
advent of biofuels policy and roughly $70/cwt. in 2009 and 2010 after
the original grain price adjustments to biofuels production growth
mandated by the Federal energy acts of 2005 and 2007.
U.S. producers had begun a herd expansion in early 2012 following
marginally profitable years in 2010 and 2011. That expansion was slowed
by the losses of 2012 and 2013 but not completely stopped as producers
correctly judged the drought-induced high grain prices and hog
production costs to be temporary. A record-large U.S. 2013 corn crop
has now pushed production costs back near $80/cwt--still high by long-
term historical standards but much more reasonable than the record
levels of 2012 and 2013.
New Threats
The latest threats to the U.S. pork industry are serious indeed,
especially since solutions to both are still not certain. The most
pressing threat we face today is PEDv, a devastating disease that has
now spread to 30 states. PEDv's biggest impact is among pigs up to 3
weeks of age, where death losses are almost always near 100 percent.
USDA's March 28 quarterly Hogs and Pigs Report estimated that PEDv has
thus far killed roughly two million head. A far more accurate estimate
from U.S. pork industry economist Steve Meyer is seven million head,
which is based on anecdotal but dependable estimates that roughly 2.6
million sows have been infected and that each has lost, on average, 2.7
piglets.
Those death losses began in the spring of 2013 in scattered sow
farms in the Cornbelt but became significant in May and June 2013 in
the Oklahoma Panhandle. Subsequent breaks in large numbers of sow farms
in North Carolina began in August and September. Large numbers of
Cornbelt sow farms began to break with PEDv in November and December,
and the number of positive case accessions, which veterinarians
consider an accurate gauge of disease activity, to animal health
diagnostic labs exploded after the beginning of 2014. (See Figure 1.)
Using the number of positive case accessions for suckling pigs to
distribute the estimated loss of seven million pigs from June 2013
through March 2014 suggests that slaughter reductions this summer could
be greater than ten percent, relative to last year's levels. Higher
market weights--because of lower feed costs and the industry's efforts
to offset some degree of PEDv pig losses--would offset three to four
percent of that reduction, but U.S. pork production would likely be
down six to eight percent in the third quarter. Such a reduction would
push U.S. hog prices up by 15 to 25 percent and force consumer-level
pork prices upward by 10 to 12 percent.
Figure 1
Weekly Positive PEDv Accessions
Source: National Animal Health Laboratory Network, posted at
www.assv.com.
The irony of this situation is that pork producers could benefit
economically from PEDv losses because of the inelastic nature of pork
and hog demand. That inelastic demand structure should cause prices to
rise by a greater percentage than production declines, meaning total
revenue for the pork industry would grow this year. When combined with
lower costs of production, the pork industry could enjoy perhaps its
best year ever financially, and producers--even those who lose pigs to
PEDv--likely would see their best individual years ever, as well. The
only exceptions to this success would be producers who farrow less
frequently than once every 2 months and lose one or more farrowing
groups of pigs to PEDv. Those operations may see output fall by a
greater percentage than prices increase, thus reducing total revenue.
But let no one be deceived that pork producers are happy about this
situation even if it results in economic benefits. The U.S. pork
industry's deep concern over PEDv is two-fold.
First, U.S. pork producers are in the business of creating and
maintaining living, healthy animals. That is, in essence, their calling
as producers. Losing millions of pigs to this disease hurts them to the
very core and actually signifies that they have profoundly failed to
live up to that calling. Producers and their dedicated employees take
these losses personally, and they hurt deeply. Producers talk about
their PEDv experiences using terms such as ``devastating,''
``heartbreaking'' and ``gut-wrenching'' when describing the disease's
impact on themselves, their family and their employees.
Second, U.S. pork producers are very concerned about the impact of
PEDv on their customers and others who depend on the pork industry.
Retail pork prices already hit a new record high in March and most
likely will rise even higher this summer and fall. That means that some
customers, both at home and abroad, will be unable to afford delicious,
wholesome pork products. In addition, reduced hog numbers mean less
feed, less medicine, fewer veterinary services and shortened hours at
packing and processing plants. All of these dynamics reduce wages and
profits generated by allied businesses. And since many of these
businesses are located in small- to mid-sized rural communities, this
will have a significant negative impact on the nation's rural economy.
So what needs to be done about PEDv?
First and foremost, it still is not known how PEDv entered the
United States. The pork industry has good evidence that two distinct
strains of PEDv were introduced along with another virus called Porcine
Deltacoronavirus. The pork industry needs USDA to conduct a thorough
investigation on the pathway these viruses used to gain entry into the
U.S. swine herd. The agency should cooperate with the U.S. Food and
Drug Administration, the Department of Homeland Security and other
appropriate agencies in that investigation.
While the U.S. pork industry has committed nearly $2 million to
research PEDv, it needs the USDA Agricultural Research Service to bring
significant resources to bear on this disease. This research needs to
focus on the basics of viral propagation, pathogenesis and control.
Development of a vaccine is only one of several important needs for
getting PEDv under control.
The pork industry also needs the National Animal Health Laboratory
Network (NAHLN) to have the ability to efficiently and electronically
communicate and generate the data needed to understand and respond to
PEDv and Deltacoronavirus. The information also needs to be available
for real-time, appropriate analysis. NAHLN's information technology and
intellectual property issues should not be a barrier to enhanced inter-
laboratory communication and data sharing.
USDA's ability to implement a coordinated surveillance program
should be enhanced. Recently, Secretary Vilsack announced an order to
require reporting of PEDv. While knowledge of disease prevalence and
movement are important in understanding the epidemiology of this
disease, USDA needs to take a thoughtful and measured approach to
development of a strategy that is practical, workable and has the
potential to be successful. The pork industry is willing to work with
USDA to move forward on these issues.
The second pressing threat for the U.S. pork industry is looming
trade sanctions from Canada and Mexico over the U.S. mandatory Country-
of-Origin Labeling law. While the Obama Administration's most recent
effort to satisfy the World Trade Organization (WTO) is still under
challenge by the two countries and awaiting a decision from a WTO
dispute resolution panel, the U.S. pork industry believes it is very
likely that decision will be unfavorable for the United States. This
means both Canada and Mexico would be free to impose tariffs on a large
array of U.S. products as soon as this year. While NPPC's foremost
concern is for U.S. pork products, this Subcommittee, along with the
entire House Agriculture Committee and the House of Representatives
must heed the fact that the sanctions would hit many more U.S. sectors
than pork, or even agriculture. Items targeted by Canada and Mexico for
retaliation include, for example, maple syrup, wine and manufactured
goods.
Can the U.S. economy's fragile recovery withstand a broad-based hit
on exports to two of the country's largest trading partners? While such
action may not trigger another recession, it very likely will damage
the economy and hurt the many hard-working families that depend on
trade with Canada and Mexico for their livelihoods. The impact of any
tariffs will go far beyond the boardrooms of the affected companies.
NPPC is, of course, most concerned about pork producers, who could
see prices fall by roughly $2 per hundred pounds of carcass weight
should tariffs actually be imposed. That reduction would reduce
producer revenues by $400 million per year.
NPPC encourages Congress to consider a legislative solution to the
WTO case that satisfies America's trade obligations under the WTO and
avoids retaliation.
Other Issues of Concern
In addition to the challenges posed by MCOOL and PEDv, U.S. pork
producers are watching several other matters that could be problematic.
DOT Hours of Service Rule
July 1, the U.S. Department of Transportation's Federal Motor
Carrier Safety Administration (FMCSA) issued a final rule that requires
truck drivers to take a 30 minute rest break for every 8 consecutive
hours of service. For drivers hauling livestock, the hours of service
would include time loading and unloading animals.
NPPC, along with 13 other livestock, poultry and food
organizations, petitioned the FMCSA for a 90 day waiver, which was
granted, then a 2 year exemption from complying with the rule. The
groups argued that the rule would place the health and welfare of
livestock at risk, particularly during times of the year with warm
temperatures, and would provide no increased benefit to public safety--
and likely would decrease public safety--while forcing the livestock
industry and its drivers to choose between the humane handling of
animals and complying with the FMCSA regulation.
Additionally, the livestock industry already has programs--
developed and offered under the oversight of the U.S. Department of
Agriculture--that educate drivers on transportation safety and animal
welfare.
Because FMCSA has not decided whether to grant the industry an
exemption from the rule, NPPC and other organizations are filing a
petition to the agency for an emergency 90 day waiver to begin June 1
when summer temperatures start to rise. If FMCSA fails to eventually
grant a waiver, NPPC intends to begin filing similar petitions every 90
days in order to protect the welfare of the animals in our control.
U.S. Dietary Guidelines
Every 5 years, USDA is required to update the U.S. Dietary
Guidelines for Americans, which encourage people to focus on eating a
healthful diet, providing evidence-based nutrition information and
advice for those age 2 and older. They serve as the basis for Federal
food and nutrition education programs, including the School Breakfast
and Lunch programs.
NPPC in March submitted written comments to the 2015 Dietary
Guidelines Advisory Committee (DGAC) and to USDA and the Department of
Health and Human Services, which requested input on steps the food
industry must take to maintain food safety, to ensure sustainability
and to reduce sodium, added sugars and fats in the food supply. NPPC
supports DGAC's work to develop ``nutritional and dietary information
and guidelines for the general public . . . based on the preponderance
of scientific and medical knowledge . . .''.
But NPPC is concerned that the DGAC is addressing issues outside
its purview and scope of expertise and that politics and public opinion
rather than sound science and medical knowledge could be used to set
recommendations and, in the case of Federal feeding programs, to set
policy that limit or restrict certain foods.
Additionally, there already exist groups working to better
understand, for example, sustainability in food production, one of the
areas into which the Committee has delved.
[America's pork producers are among the most environmentally
and socially conscious food producers in the world, and they
have worked to improve diets and enhance breeding practices to
raise leaner, healthier pigs to meet the demand for quality
pork with less fat.]
The committee should remain committed to its mission of providing
``independent, science-based advice and recommendations for development
of the Dietary Guidelines for Americans, 2015'' and not use its limited
funding and nutritionally focused expertise on non-nutritional criteria
to determine winners and losers among the country's food producers.
Conclusion
The U.S. pork industry is the lowest-cost producer and No. 1
exporter of pork in the world, and U.S. pork producers continue to
produce the most abundant, safest, most nutritious pork in the world.
They have proved very resilient, weathering financial crises and
diseases as well as the vagaries of a supposedly-free market economy
pushed and pulled in various directions by government intervention and
regulation, while investing in and adopting new technologies that have
promoted animal health, protected the environment and added thousands
of jobs and billions in national income to the American economy.
To enable pork producers to continue as leaders in the global and
domestic economies, the U.S. pork industry urges Congress and the
Administration to pursue Federal policies and regulations that support
U.S. pork production rather than hinder its ability to continue to
produce safe, lean and nutritious pork and pork products for the global
marketplace.
The Chairman. Thank you, Dr. Hill.
The chair will exercise a point of privilege, recognize
Ranking Member Costa to introduce our next witness.
Mr. Costa. Thank you very much, Mr. Chairman, and I
appreciate that courtesy.
Our next witness is Mr. Smith, Mr. Mike Smith, who was born
and raised in Southwestern Oregon but now calls California his
home. He was born on a commercial cow/calf operation, graduated
from Cal Poly in California but then got his master's degree at
the Oklahoma State University, for my friends from Oklahoma.
He is a manager who focuses on the partnership for quality
and marketing program for Harris Ranch. Harris Ranch in
California is one of America's leading producers of quality
beef, and Mike does a great job and he is joined here by his
wife, Sarah, and his two children, Clayton and Jesse. They are
getting a chance to watch Dad in action. So we welcome Mr.
Smith here today.
STATEMENT OF MICHAEL T. SMITH, SPECIAL PROJECTS
MANAGER, HARRIS RANCH, SELMA, CA; ON BEHALF OF
NATIONAL CATTLEMEN'S BEEF ASSOCIATION
Mr. Smith. Thank you, and good morning, Chairman Crawford,
Ranking Member Costa, and Members of the Committee.
I am here today representing the National Cattlemen's Beef
Association, the North American Meat Association and the
company I work for, Harris Ranch, and I know that Congressman
Costa is very familiar with the company, but for those who are
not, let me give you a brief background.
Harris Ranch is one of the largest family-owned
agribusinesses in the western United States. We operate five
primary business entities under the Harris Farms of banner. For
example, our hospitality division is located equidistance
between San Francisco and Los Angeles. We operate a 150 room
inn and a restaurant complex that will serve in excess of 1,500
meals each and every day.
Additionally, we operate a thoroughbred race horse
division, and the fact is, the odds on favorite this Saturday
at the Kentucky Derby is a horse by the name of California
Chrome. That horse's dam was bred by a stallion that stands in
our breeding barn. He was born and foaled in our foaling barn,
and for the first 2 years of his life remained at Harris Farm.
So suffice to say, we are pretty proud of that horse. Now, I
hope I just didn't jinx him for Saturday.
Our cattle feeding division operates one of the largest
beef feedlots in the United States with a one-time capacity of
120,000 head. In total, we will feed in excess of a \1/4\
million head of cattle each year. These cattle will then be
slaughtered, fabricated and further processed in our state-of-
the-art beef processing facility that is located roughly 50
miles away from the beef feedlot.
Finally, our farming operation encompasses roughly 17,000
acres of ground. In addition to the permanent crops of almonds,
pistachios and citrus, in a normal year, and I will highlight
that term normal year, we will grow tomatoes, onions, garlic,
broccoli, lettuce, asparagus, melons, just to name a few. And
the reason I highlighted that key word normal, we haven't had
one of those in quite some time.
So that will kind of segue into the start of this
testimony. I want to start with water, or more correctly, state
of the lack thereof. In my home State of California we are
suffering through one of the worst droughts in recorded
history. Make no mistake, however, this drought is made even
worse by actions taken by Federal and state governments to
restrict the rightful allocation of water to farmers and cattle
producers throughout California, especially those in the
Central Valley, a region of the state that grows well over \1/
2\ of the fruits and vegetables in this country.
Our concern at Harris Ranch is the with Delta smelt. That
is a 3 inch bait fish that because of its listing as an
endangered species has profoundly impacted water delivery in
the State of California. As a net result, this year's zero to
possibly five percent allocation of water will result in Harris
Farms fallowing over 11,000 acres of some of the most highly-
productive crop ground in the United States. That is \2/3\ of
all the ground we farm will sit idle this year.
But cattle in other states face similar threats with the
very real impacts of the Endangered Species Act. The potential
listing of the Sage Grouse and Lesser Prairie Chicken will
severely impede the ability of cattlemen in the Western and
High Plains regions of the United States to operate their
ranches. The undeniable fact is that Congress must immediately
reopen the Endangered Species Act and provide relief to the
true stewards of the land, this nation's farmers and ranchers.
One final issue impacting the beef industry I would like to
discuss with you today is mandatory Country-of-Origin Labeling.
As a company, we are extremely upset and quite frankly
disappointed that Congress did not provide a legislative fix to
COOL in the recent farm bill. COOL has been a particular burden
to the beef industry for far too long now. Proponents of COOL
have argued that mandatory labeling would cause the consumer to
pay more for U.S. beef.
Five years of implementation have proved just the opposite.
In fact, a recent Kansas State study found that the vast
majority of consumers don't even look for Country-of-Origin
Labeling when buying beef; in fact, most don't even know a COOL
label exists nor did they care.
As one of the first-branded beef companies in the United
States, you would think that Harris Ranch would strongly
support Country-of-Origin Labeling, but the fact is, it is just
the opposite. Our experience is that our customers are not
interested in nor do they wish to pay a premium for country-of-
origin information.
The question then becomes, why continue to implement a law
that harms the U.S. cattle industry when the consumer is not
demanding it? That question is especially relevant with the
pending WTO ruling. Canada and Mexico have consistently ranked
as two of the top export markets for U.S. beef. Last year,
Canada and Mexico collectively imported just under $2 billion
worth of U.S. beef. If we lose access to those markets, they
are restricted by the enactment of tariffs, that action will
have a profoundly negative impact.
In closing, we are perplexed why the government wants to
hurt our industry for a simple marketing program that has
proven to be ineffective, and let me be clear, COOL is all
about marketing; it has absolutely nothing to do with food
safety.
And finally, COOL is not a consumer-right-to-know issue; if
it were, COOL would be applied to all beef and not just that,
that is marketed through the retail level.
Mr. Chairman, thank you for the opportunity to be here
today.
[The prepared statement of Mr. Smith follows:]
Prepared Statement of Michael T. Smith, Special Projects Manager,
Harris Ranch, Selma, CA; on Behalf of National Cattlemen's Beef
Association
Mr. Chairman, Ranking Member Costa, thank you for the opportunity
to be here today to discuss the state of the beef industry.
I am here this morning representing the National Cattlemen's Beef
Association, the North American Meat Association, and the company I
work for . . . Harris Ranch.
For those unfamiliar with Harris Ranch, the company is one of the
largest, family-owned agribusinesses in the western United States.
There are five primary business entities operated under the Harris
Ranch banner. Our hospitality division, located midway between San
Francisco and Los Angeles, operates a 150 room inn and a restaurant
complex which serves an average of 1,500 meals each day. Our cattle
feeding division operates one of the largest feedlots in the U.S., with
a one-time capacity of 120,000 head of cattle. In total, we will feed
roughly 250,000 head of cattle each year. These cattle are then
slaughtered, fabricated and further processed in our state-of-the-art
beef processing facility. In addition, we operate one of the largest
Thoroughbred horse ranches in the western United States, and will breed
roughly 300 brood mares at our facility each year. Finally, our farming
operation encompasses over 17,000 acres growing over 35 different crops
on the west side of the fertile San Joaquin Valley. In addition to the
permanent crops of almonds, pistachios, grapes and citrus; in a normal
year we will grow crops like tomatoes, onions, garlic, broccoli,
lettuce, asparagus and melons. But the key word here is ``normal'', and
we have not had a ``normal'' year in quite some time.
This is a very difficult time for the beef industry. The United
States currently has the lowest cow herd in 60 years. There are a
number of issues negatively impacting the cattle industry. I would like
to highlight five that are having a direct and immediate impact:
drought, Federal regulations, taxes, trade and Country-of-Origin
Labeling.
Top of mind of course is water, or more precisely, the lack
thereof. Most of the country west of the Mississippi finds itself in
years 4, 5, or 6 of drought. In my home State of California, we are
currently suffering the worst drought in recorded history. The drought
is made worse by the actions taken by the Federal and state government
to restrict the rightful allocation of water to farmers and cattle
producers throughout California, but especially in the Central Valley.
These actions threaten the viability of agriculture in California--a
state that provides over \1/2\ of the fruits and vegetables to the
United States, as well as highly quality beef. We must have immediate
relief from Federal laws that are severely restricting our access to
water such as the Endangered Species Act. Congress must reopen the ESA
and provide relief--and a little common sense--to reign in a law that
has caused untold hardship for many hardworking people.
It's not just the ongoing drought that is hurting our industry. The
onslaught of Federal rules and regulations continue to put pressure on
the growth of America's cattle herd. In California, we are already
subject to more rules and regulations than any other cattle producing
state. These state rules are compounded by rules coming from agencies
such as the Environmental Protection Agency (EPA). The EPA's recently
published a proposed rule to redefine the waters of the United States
under the Clean Water Act. We have been anticipating this rule for
quite some time, and we have made it clear that we have serious
concerns about expanding the jurisdiction of EPA and the U.S. Army
Corps of Engineers. While the proposed rule does include some
exemptions for agricultural practices, it does not cover every body of
water that will be encountered on cattle farms and ranches across the
country. Under this proposal, it is likely that some cattle producers
will have to file for a permit to conduct activities on their private
property. Effectively, this amounts to a huge land grab by EPA and
directly threatens long established private property rights. To that
end, it cannot be allowed to move forward. We need Congress to step in
and either shut down this effort by EPA permanently, or restrict their
funding to move such a proposal forward.
Transportation is another area where we could use some relief from
obsolete or ridiculous rules. The U.S. Department of Transportation is
currently enforcing their ``30 minute'' rule which requires drivers to
stop for a mandatory 30 minute rest during each 8 hour shift. Stopping
for fuel or meals does not satisfy this requirement. While we support
rules to ensure that drivers operate in a safe manner, we must also
look out for the welfare of our cattle. Shipping cattle is a stressful
time in their lives. One way to keep the animals comfortable is to have
air constantly moving through the trailer while the truck and trailer
are moving down the road. If the vehicle is required to stop, airflow
stops. The safety and welfare of our cattle is our utmost priority and
we must be allowed the option to continue to travel without this DOT
restriction. This is especially true during the summer months. I urge
the Committee to engage with DOT to ensure that livestock haulers are
exempt from this rule.
We also need to allow more weight to be shipped on these trailers.
As I mentioned, shipping is stressful on cattle, and as a result, they
lose weight or ``shrink'' in value. We know that with an additional
axle, we can load these trailers to over 80,000 pounds and have less
wear and tear on roads and bridges than we do now with only two axles.
As Congress looks at the transportation reauthorization, we need to
look at how we maximize our cattle shipping capabilities.
Taxes are another issue which has a huge impact on the viability of
cattle operations in the United States. It is extremely important that
Congress take urgent action to make permanent the tax extenders package
made up of the tax provisions which expired at the end of 2013. In
particular, we would like to see the Section 179 expensing be made
permanent at a level of $500,000, like it was prior to expiration.
Section 179 expensing has been very beneficial to producers who
purchase new equipment by allowing them to depreciate the value quicker
and at a larger amount. We can't talk about taxes without mentioning
the Death Tax. Even though Congress made improvements to the Death Tax
provisions at the end of 2012, we still need full repeal. If even one
producer has to sell off a part of their operation to pay the Death
Tax, it is one too many. In order to make sure that a future Congress
does not revert back to the $1 million exemption, it is imperative that
we finally repeal the Death Tax once and for all.
For the cattle industry, trade is one of our top priorities. We
have a mature and fully developed market here in the United States. As
such, it is essential we look to the international markets to grow the
U.S. cattle industry. That is where international trade becomes very
important to us. When you look at countries like China, we see that
they have an increasing middle class with more disposable income. When
you have more income, you want to eat better. When you want to eat
better, you want protein. Obviously, we want the protein of choice to
be U.S. beef. The trade agreements we have now are worth roughly $300
per head in the value of fed cattle. That is almost 20% of their
overall value.
As we speak, our negotiators are working to conclude the Trans-
Pacific Partnership (TPP). Of particular interest to us is how this
agreement will define beef trade between the United States and Japan.
We, and many of you as Members of Congress, made it very clear to Japan
that in order for us to support their entrance into TPP, they had to
commit to eliminating tariffs on beef. As of now, they have been
pushing back on that point and want to reduce, but not eliminate
tariffs. In order for this to be a true free trade agreement, and one
that is based on what to expect of 21st century trade pacts, they need
to eliminate the tariff on U.S. beef. The current 38.5% tariff is
unacceptable, and your support for TPP should be based on the
elimination of this tariff.
While we believe in trade, we also want to make sure we are basing
our trade deals on sound science. USDA's Animal and Plant Health
Inspection Service (APHIS) has proposed a rule that would allow certain
states and regions within Brazil to ship fresh and frozen beef into the
United States. The issue here is Brazil still has a problem with foot-
and-mouth disease (FMD). We know that the FMD virus can travel on fresh
and frozen product, so that immediately puts our industry at risk. In
preparing our comments to APHIS on this issue, we looked at the
economic impact of a FMD outbreak in the United States. Economic models
show that a case of FMD could cost our industry up to $50 billion. That
includes the loss of foreign markets much like we saw with the case of
BSE in 2003. The World Organization for Animal Health (OIE) has
guidelines that define how trade can be accomplished with countries
that have disease issues. However, we don't believe that Brazil has the
resources or commitment to implement and fulfill those protocols.
Even more concerning is that we don't believe that APHIS adequately
prepared for this proposed rule. In preparing our comments, we
requested the documents that APHIS used in formulating this rulemaking.
Of the documents they gave us, 60% were in Portuguese with no
translation. We wonder how these documents could have been effectively
used by APHIS. We were then forced to FOIA the remaining documents we
had requested, and we still have not received those documents even
though the comment period closed last Tuesday. Of particular interest
is the result of a site visit conducted in 2013. We believe any site
visit would have huge implications on how Brazil intended to implement
the safeguards and protocols. To date, we have not received this
document of even an acknowledgement from APHIS that it exists. These
games do not give us faith that APHIS has done their due diligence. We
are asking that you engage with APHIS on this rule and help us shut it
down.
Trade leads me to my final point. We are still very upset and
discouraged that Congress did not fix mandatory Country-of-Origin
Labeling (COOL) in the farm bill. COOL has been a particular burden for
our business.
COOL has plagued our industry for almost 2 decades. Proponents of
COOL have long said that mandatory labeling would cause the U.S.
consumer to pay more for U.S. beef. Five years of implementation has
proved just the opposite. Kansas State University conducted a study on
COOL which showed that the vast majority of consumers don't even look
at the COOL label when buying beef. In fact, most didn't even know
there was a COOL label. While the COOL proponents say they have surveys
that show Americans want to know where there beef comes from, the K-
State study actually measured how Americans vote. Americans vote with
their pocketbook by purchasing beef, and the vast majority don't
consider COOL in their purchasing decision. Why then would we continue
a law that has incurred costs on the U.S. cattle industry when the
consumer is not demanding it? That question is especially relevant when
you look at the World Trade Organization (WTO) case filed by Canada and
Mexico against the COOL program. If they continue to win their case,
which we believe they will, they will be allowed to retaliate against
our industry. Canada and Mexico have consistently been two of our top
five markets for the export of U.S. beef. In 2013, Canada imported over
a billion dollars in U.S. beef and Mexico imported just under a billion
dollars. That is big money for our industry. If we lose access to those
markets, or they are restricted by the enactment of tariffs, that will
have a negative impact on all U.S. producers. We remain perplexed why
our government wants to hurt our industry for a simple marketing
program that has proven to be ineffective? COOL is all about marketing
and has absolutely nothing to do with food safety. Those who use that
argument know nothing about the food safety protocols in this country.
It is also not a ``consumer right to know'' issue. If it were, then
COOL would apply to all beef sold and not just the beef sold at the
retail level. This claim is a red herring used by COOL proponents in a
desperate attempt to hold on to their position. Clearly COOL is a farce
and its proponents obviously have no idea how modern beef production in
the United States actually works. We have to fix COOL now, and I would
urge Members of this Committee to take up this challenge.
Mr. Chairman, thank you for the opportunity to be here today.
The Chairman. Thank you, Mr. Smith.
I will now recognize Mr. William P. Roenigk. Mr. Roenigk,
you are recognized for 5 minutes.
STATEMENT OF WILLIAM ``BILL'' P. ROENIGK, SENIOR VICE
PRESIDENT AND ECONOMIST, NATIONAL CHICKEN
COUNCIL, WASHINGTON, D.C.
Mr. Roenigk. Thank you, Chairman Crawford, Congressman
Costa, and Members of the Committee.
We very much appreciate the opportunity to participate in
this important and timely hearing on the status of the U.S.
chicken industry and the issues that are impacting the poultry
industry. On behalf of National Chicken Council, I appreciate
your invitation to provide comments and recommendations
regarding a number of vital issues and difficult challenges
confronting our industry.
U.S. chicken producers and processors will certainly need
the Subcommittee's support if the chicken industry is to
successfully overcome the increasingly broad array of difficult
issues and challenges, some of which I will outline in my
statement. I am Bill Roenigk and presenting this statement on
behalf of the National Chicken Council, the organization that
represents companies that produce and process over 95 percent
of the chicken in the United States.
The 30+ vertically-integrated firms are comprised of
federally-inspected chicken industry, I can assure the
Committee are a very dynamic, forward looking and most
essential part of America's agribusiness. Most importantly,
these companies can be characterized as survivors. They work
hard every day to continue to earn that status.
As Dr. Glauber said earlier this morning, chicken
production this year will reach a record high of 38.1 billion
pounds on a ready-to-cook weight basis, 1.8 percent above 2013,
a percentage very similar to what we increased last year.
Normally, current market conditions would stimulate production
to be somewhat higher, that is a percentage more aligned with a
long-run average of about four percent per year. So why are
chicken producers not stepping up production to better match
the long-term average of four percent?
In short, we would if we could, but we can't. Yes, we would
like to produce more pounds of chicken if we could, but
unfortunately at this time, we cannot. The basic primary reason
for the industry's inability to step up production can be
attributed to the problems caused by a failed policy that has
been with us since 2006.
The devastating impact of an inflexible Renewable Fuel
Standard for conventional biofuels especially following this
somewhat unprecedented drought of 2012 that severely reduced
corn harvest continues to have broad and deep ramifications.
Very high and very volatile corn prices even prior to 2012,
most notably in 2009 when chicken production decreased almost
four percent for only the third time since 1950 helps set the
stage for the restrained production.
Not only did chicken producers have to significantly adjust
production downward to survive but also the negative economic
ripple affected the primary breeders. This is the life blood of
our industry. The primary breeders had to adjust their
production also as companies reduced their orders for day-old
pullet chicks and in some cases even had to cancel their
orders, and that inflicted financial pain on the primary
chicken producers.
The chicken companies will rebuild their hatch, resupply
flocks to better meet market needs, but until then, the chicken
industry will continue to grow production but it will be at a
more measured pace. We are especially aware that increased
chicken production at this time and for the foreseeable future
would be appreciated by consumers.
As we have heard, cattle and hog producers are confronting
their own challenges to produce more beef and pork, and at this
time, we think many consumers, if not most consumers, are
increasingly finding chicken a favorable alternative when the
competition provides such an opportunity to better compete.
It is frustrating to our industry that we are not able to
increase our production, especially when we hear people say it
only takes 7 weeks to grow a chicken. In the end, consumers are
once again paying the price for a biofuels policy, and program
that is broken beyond repair. In short, the state of the
industry at least for those surviving companies is good in
terms of net margins, but the industry continues to be
frustrated by the results of an inflexible, renewable fuel
policy.
In the interest of time, let me just mention a couple other
issues I have listed here. The GIPSA rule that was finalized,
has gone against the instructions of Congress. Efforts to
defund that Congress has done several times. We think it is
important that the rule be permanently defunded.
Also, regarding international trade, we very much support
the prompt passage of trade promotion authority, continue
Congressional support for a successful conclusion to the Trans-
Pacific Partnership and to Transatlantic Trade and Investment
Partnership and continue Congressional support for the WTO
actions involving U.S. poultry trade with China, India and
Indonesia and South Africa.
The National Chicken Council looks forward to working more
closely with the Committee so that poultry producers will have
a better opportunity to successfully manage the increasing
difficult challenges and issues.
Thank you, Mr. Chairman, and Members of the Committee.
[The prepared statement of Mr. Roenigk follows:]
Prepared Statement of William ``Bill'' P. Roenigk, Senior Vice
President and Economist, National Chicken Council, Washington, D.C.
State of the Chicken Industry: 2014
Good morning, Chairman Crawford, Congressman Costa, and Members of
the Subcommittee. Thank you, Chairman Crawford, for the opportunity to
participate in this important and timely hearing on the status of the
U.S. chicken industry and issues impacting the state of the poultry
industry. On behalf of the National Chicken Council, I appreciate your
invitation to provide comments and recommendations regarding a number
of vital issues and difficult challenges confronting our industry. U.S.
chicken producer/processors will certainly need the Subcommittee's
support if the chicken industry is to overcome the increasingly broad
array of difficult issues and challenges some of which I will outline
in my statement.
I am Bill Roenigk and am presenting this statement on behalf of the
National Chicken Council, the organization that represents companies
that produce and process over 95 percent of the chicken in the United
States. The 30+ vertically-integrated firms that comprise the
federally-inspected chicken industry, I can assure the Committee, are a
very dynamic, forward-looking and essential part of American
agribusiness. Most importantly, these companies can be characterized as
being ``survivors.'' They work hard every day to continue to earn that
status.
Snapshot of 2014 Chicken Production
USDA estimates that chicken production this year will reach a
record high of 38.1 billion pounds on a ready-to-cook weight basis, 1.8
percent above 2013, a percentage increase very comparable to last
year's rate. Current favorable market conditions would normally
stimulate production to be somewhat higher, that is, a percentage
increase more aligned with the long-run annual average of four percent.
So, why are chicken producers not stepping-up production to better
match the long-term average of four percent? We would if we could, but
we can't. Yes, we would like to produce more pounds of chicken if we
could, but unfortunately we, at this time, cannot.
The basic, primary reason for the industry's inability to step-up
production can be attributed to problems caused by a failed policy that
has been with us since 2006. The devastating impact of an inflexible
Renewable Fuel Standard for conventional biofuels, especially following
the somewhat unprecedented drought of 2012 that severely reduced the
corn harvest continues to have broad and deep ramifications. Very high
and very volatile corn prices even prior to 2012, most notably in 2009
when chicken production decreased almost four percent for only the
third year since 1950 helped set the stage for the restrained
production. Not only did chicken producers have to significantly adjust
production downward to survive, but also the negative economic ripple
effect of an inflexible RFS caused the primary broiler breeders to also
significantly adjust their production downward. Further, broiler
breeders had to curtail their production plans for the future. Primary
breeders are the companies that are the lifeblood of our business
because they generate the grandparents, great grandparent, and pedigree
flocks. The primary breeders suffered significant financial strain
during this time as orders for day-old pullet chicks were reduced or
even cancelled by chicken producers who were also confronting severe
financial pain because of an inflexible RFS. It is obviously taking the
primary breeder companies time to rebuild their grandparent flocks that
produce the day-old pullet chicks that mature in 7 months into the
mother hens for our chickens. In time the primary breeders will
generate larger, more sufficiently-sized flocks. At that time they will
again be able to provide pullet chicks at a more normally-expected
rate. In turn, chicken companies will enlarge their hatchery supply
flocks to better meet market needs. Until then, the chicken industry
will continue to grow but it will be at a more measured pace.
We are especially aware that increased chicken production at this
time and for the foreseeable future would be appreciated by consumers.
As cattle and hog producers confront their own challenges to produce
more beef and pork, many consumers, if not most consumers, increasingly
find chicken a favorable alternative. When the competition provides an
opportunity to better compete, it is a bit frustrating to find
yourself, as the chicken industry does, in the position of ``we would
if we could but we can't,'' especially when we hear ``It only takes 7
weeks to grow a chicken.''
In short, the state of the industry, at least for those surviving
firms, is good in terms of net margins but the industry continues to be
frustrated by the results of an inflexible renewable fuels policy and
program. The often-dismissed fact, especially today as grain prices
moderate, is that the RFS has inflicted deep and sustained damage to
chicken production. In the end, consumers are once again paying the
price for a biofuels policy and program that are broken beyond repair.
High and Volatile Corn Prices Force ``Survivor'' Chicken Companies to
Cope
With the many difficult challenges chicken companies have faced and
are facing in production, processing, and marketing, firms operating
today have certainly earned the title of ``survivor.'' Over the past 5
decades broiler production has decreased on an annual basis only three
times: 2 years in the mid-1970s and then again in 2009. With the very
steady track-record of increasing production, the industry's growth has
offered increased opportunities for growers to expand their operations
and build their net worth. Since the Renewable Fuel Standard (RFS) was
implemented in 2006, that strong track record of growth has been in
very serious jeopardy because an overabundance of corn is being
diverted to fuel production and thus squeezing-out corn that should be
available for feed, even when there is not an adequate supply of corn
for all users.
In October 2008 when corn prices escalated to record high levels,
it became more and more evident that the national policy regarding
corn-based ethanol has been heavily tilted toward using corn for fuel
rather than for food/feed. The need to re-balance the policy is long
overdue. Picking one market for corn to be the winner at the expense of
the loser should not be the function of government. Mandating the use
of ethanol and protecting ethanol's feedstock from competition is
double over-kill. Greater energy independence is a worthy goal for the
United States, but the negative and unintended consequences of moving
too far too fast with corn-based ethanol have become overly apparent.
For the chicken industry, like other animal agriculture producers,
fewer pounds of product have been produced and will also not be
produced in the foreseeable years. Consumers who have sufficient income
to devote to cover the higher costs of food will reach deeper into
their pocketbooks and pay the higher food prices. Consumers in this
country and around the world who cannot continue to afford animal
protein in their diets will have to shift to other foods. However, with
land being a limiting factor in the production of food, it is most
likely all foods will be higher in price, whether of animal origin or
not.
It can reasonably be argued that U.S. animal agriculture when
compared with ethanol producers and overseas buyers is the most
vulnerable corn buyer whenever there is a shortfall in corn.
Renewable Fuel Standard for Conventional Biofuel: Time to Repeal
Recent market developments and government actions again re-confirm
that the Renewable Fuel Standard for conventional biofuels is broken
beyond repair and, therefore, must be repealed. The RFS imposes biofuel
blending requirements that greatly and negatively impact the chicken
industry. When the original RFS was implemented during the 2005/06 crop
year, ethanol consumed about 15 percent of the corn crop. By the 2012/
13 crop year, ethanol's consumption reached more than 43 percent of the
crop.
EPA has proposed a reduction in the RFS this year, but nonetheless,
ethanol will consume about 40 percent of the 2013/14 U.S. corn crop.
Despite EPA's proposed adjustment this year, under the statute
providing for the RFS (the Energy Independence and Security Act of
2007) corn ethanol is still mandated to grow further.
The RFS has created a very uneven playing field for chicken
companies to compete for necessary feedstuffs. Since the RFS was
enacted, chicken companies have incurred over $44 billion in higher
actual feed costs due to the RFS. Adding together the higher cumulative
feed costs for chicken, turkey, table eggs, and hogs, the total is
almost $100 billion in additional feed costs. Also higher feed costs
for other agricultural animal producers, such as dairy and beef cattle,
would add measurably to the $100 million cost. To put this $100 million
of added feed cost in perspective, it can be noted that ethanol
production has totaled a cumulative 85.4 billion gallons since the RFS
was expanded in 2007. Spreading the $100 million over the 85.4 billion
gallons of ethanol means poultry and swine producers have been forced
to incur an additional $1.35 per gallon by paying these higher feed
costs. This perspective, I suggest, helps illustrate the food versus
fuel situation.
Most importantly, from 2007 through 2013, due in large part to high
and volatile feed costs brought on by the RFS, at least a dozen chicken
companies have ceased operations, filed for bankruptcy, or have been
acquired by another company. And, the beat goes on, with two more
chicken companies so far this year being acquired by other companies.
While corn prices have moderated somewhat this year from their recent
record highs, the chicken industry is only one drought away from
another economic crisis.
The National Chicken Council believed at one time that the original
RFS included a workable provision that provided for an ``off ramp'' in
times of economic crisis. On at least two major occasions, that belief
has proven to be very naive. In 2012, the worst drought in more than 50
years coupled with record high and very volatile corn prices was deemed
insufficient to trigger a temporary waiver of the RFS. Similarly, in
2008, historically high corn prices did not trigger the waiver under
EPA's authority. At the same time with ethanol producers faced with
domestic blend wall limits, the RFS gives ethanol producers such
leverage that they are able to produce and export surplus ethanol,
which further constrained the corn market in the United States. One has
to ask if such exports and the import of Brazilian sugar cane based
ethanol under the ``advanced'' category of the RFS further the law's
intent to have the United States gain greater energy independence.
EPA's proposal for the 2014 RFS reflects again clear evidence that
our nation's biofuels policy is broken, and broken well beyond repair.
The issues of the blend wall, food versus fuel, mandates for non-
existing cellulosic ethanol and other issues will not go away until
Congress deals with the reality of the unworkable, unsustainable,
imbalanced, and misnomered RFS.
The National Chicken Council strongly supports efforts to create a
more reasonable and sustainable approach to the nation's energy policy.
We recognize EPA's recently proposed action to adjust the RFS may prove
to be a small first step. Nonetheless, Congress must provide a longer
term, more certain solution by repealing the mandate for corn-based
ethanol.
Over-Reaching GIPSA Regulations Need Addressing
In the 2008 Farm Act Congress directed the U.S. Department of
Agriculture/ Grain Inspection, Packers and Stockyards Administration
(GIPSA) to develop criteria in five areas of poultry and swine
contracts. The five areas were:
Undue or unreasonable contractual preferences/advantages to/
for particular contracting parties;
Whether a live poultry dealer or swine contractor has
provided reasonable notice to a poultry grower or hog farmer of
any suspension of delivery of birds or hogs;
Reasonable requirements for additional capital investments
over the life of a contract;
Provide reasonable period of time for a poultry/swine grower
to remedy a breach of contract; and
Reasonable terms for arbitration in poultry and swine
contracts.
When USDA published its proposed rule in the Federal Register on
June 22, 2010, interested parties were given 60 days to comment on the
rule. The very short comment period provided an insufficient time for a
serious and thorough analysis of the rule. Further, there was no
credible, adequate economic impact analysis accompanying the proposed
rule. Most egregious, the proposed rule went far beyond what Congress
had instructed USDA to consider. After significant debate, USDA
extended the comment period an additional 90 days.
Six areas in the proposed rule where GIPSA went beyond what
Congress instructed are as follows:
Onerous record-keeping requirements;
Redefines ``competitive injury'' requirements;
Redefines the term ``fairness'';
Additional capital investment requirement for grower to
recoup 80% of costs;
Modification in the payment system to growers; and
Disclosure and online publication of contracts.
The rule would have burdened the broiler industry with a cost
impact of over $1 billion during the first 5 years, and further, would
change the way companies and growers do business that has been
successfully conducted for more than 5 decades. The vertically-
integrated industry structure with growout contracts with family
farmers is a system that has been successful and has made the U.S.
chicken industry the most efficient and economically-viable in the
world. The rule would have put the U.S. chicken industry at a global
disadvantage, as other countries would not have to face these onerous
requirements. The rule would have created greater uncertainty and cause
unnecessary and costly regulatory and legal burdens in the marketplace
by making it much more difficult for companies and contract growers to
get competitive financing. In addition, companies would not have the
incentive to use capital to improve and expand operations; rather there
would be more of a financial incentive to restructure their businesses
to include their own company growout operations. In short the rule has
the government dictating private contract terms between businesses.
Since June 2010, when the rule was proposed, poultry and livestock
producers have been working to have the GIPSA rule be compatible with
Congressional intent. After the rule was proposed, Congress asked for
an economic impact analysis of the rulemaking.
Despite objections raised by bipartisan opposition in Congress,
GIPSA issued a final rule in December 2011 that still exceeded the
agency's authority under the Packers and Stockyards Act and also failed
to comply with the 2008 Farm Bill. Congress defunded the rulemaking
effort in the FY 2012 Agriculture Appropriations bill.
Defunding language was also included in both of the FY13 continuing
resolutions and the FY 2014 continuing resolution. Similar language
needs to be included in the FY 2015 Agriculture Appropriations bill.
Such language or amendment mirrors the action taken by Congress in the
appropriations bills and signed by the President four times. The
defunding amendment was also offered during the July 2012 markup of the
House version of the farm bill and passed with an overwhelming majority
voice vote.
Defunding language has been passed by Committee action and by the
entire Congress five times over the past 3 years (FY12 appropriations
bill, 1st FY13 CR, 2nd FY13 CR, House Agriculture Committee farm bill
markup in July 2012, and House Agriculture Committee farm bill markup
in May 2013). Clearly, the track record of passage by Congress reflects
strong Congressional support to correct the GIPSA rule. The National
Chicken Council urges the Subcommittee to support language to correct
the GIPSA Rule in the FY 2015 Appropriations bill.
Prompt Passage of Trade Promotion Authority Necessary/TPP and T-TIP
Success Imperative
Congressional approval of Trade Promotion Authority (TPA) which was
previously called ``fast track authority'' is necessary to ensure a
more successful outcome for the on-going negotiations for the Trans-
Pacific Partnership (TPP) and the Transatlantic Trade and Investment
Partnership (T-TIP). It is necessary to have TPA enacted because it
will be essentially impossible to gain Congressional trade pact
approval otherwise.
TPA legislation provides for an up or down vote in the House and
Senate without the opportunity to provide amendments or make changes in
the agreements. The previous authority expired in 2007 and this vacuum
has given negotiators on the other side of the table an unnecessary
excuse to drag their feet toward reaching a final, beneficial deal. The
``heavy lifting'' in negotiations is now taking place, as we have seen
in recent reports.
Trade Promotion Authority legislation must receive prompt passage
so that the position of the U.S. international trade negotiators is
strengthened as they continue to move forward to successfully conclude
these two critically important agreements. Both pacts are expected to
include provisions of great importance and benefit to U.S. poultry
interests.
At the T-TIP Stakeholders Forum held by USTR late last year
accompanying the National Chicken Council statement were two letters
that had been previously delivered to the U.S. Trade Representative in
2013. Both letters were signed by over 45 agricultural organizations.
Both letters stated ``(w)e strongly believe that a comprehensive and
ambitious U.S./EU FTA will generate economic growth, reduce market
volatility, and create thousands of new jobs on both sides of the
Atlantic. But such a momentous free trade agreement must be built on
the foundation established by the United States in the TPP and other
U.S. free trade agreements, which build, as you have said, `the best
trade policy for the future' ''. As the negotiators for both TTP and T-
TIP move toward a conclusion, that statement is even more important.
At one time, Russia and China were the United States two largest
poultry export markets, but these two markets have been severely
disrupted with trade curtailed from previous levels. It is now more
important than ever to expand poultry sales to other world markets.
Passage of these trade agreements would cost U.S. taxpayers essentially
nothing but would create thousands of jobs in the United States. It is
difficult to think of a more appropriate time than now, to have TPA
approved and for TTP and T-TIP to be successfully concluded. This is
especially true if more jobs and an improved economy are indeed top
national priorities.
Although international trade rules in the post-Uruguay Round world
are certainly not perfect, they have been improved significantly and
are generally accepted and observed by the majority of WTO member
nations. Rules for enforcement of trade obligations have also been
strengthened through an improved system of dispute settlement, and can
be very effective if our government is willing to use those enforcement
mechanisms and to insist on adherence by our trading partners to the
rule of law.
NCC supports the move toward improved free and fair international
trade. That position has been demonstrated and shared with Congress
countless times. With more than 20 percent of our production being
exported to over 100 other countries out outside-the-border customers
are becoming more and more important, especially for our dark meat
parts.
TTP, if successfully concluded for U.S. poultry, will expand U.S.
chicken exports by at least $500 million annually and possibly more, if
restrictive market access measures and sanitary/veterinary issues and
other non-tariff trade barriers can be addressed.
T-TIP could benefit U.S. poultry exports by over $600 million
yearly. Such increases would help generate more farm income, jobs in
rural, districts, and improve the U.S. trade balance.
Resolution of Poultry Trade Issues Would Expand Exports
Timely resolution of certain pending trade issues more specific to
U.S. poultry would also greatly enhance the opportunity to increase
U.S. chicken exports. It is recognized that the Office of the U.S.
Trade Representative has an abundance of priorities on its agenda, but
there are a number of international poultry trade disputes that require
a greater sense of urgency.
Among the special concerns of the U.S. chicken industry are the
following:
The effectiveness of international rules in challenging
unfair practices was demonstrated when the U.S. Government
challenged the unfair imposition of antidumping duties on U.S.
poultry by the Republic of China. Prior to 2009, the United
States was exporting approximately $700 million of chicken
products to China. But in 2009, after the U.S. imposed
safeguard duties on Chinese tires, and Congress discriminated
against the Chinese by passing the so-called DeLauro Amendment
that denied China the right to apply for USDA Food Safety and
Inspection Service approval of some of its products (the only
country Congress singled out for this treatment), China
retaliated and imposed dumping duties on our poultry products.
Unfortunately, because of the size and success of our exports,
our industry became the target for retaliation and a pawn in
this trade dispute between China and the United States.
WTO ruled in August 2013 that China had violated numerous
obligations when China imposed antidumping duties and
countervailing duties on U.S. chicken. China did not accept the
WTO finding and a WTO panel was established in March this year
to determine if China's claim of consistence is valid.
Also, quite irksome is China's statewide bans on poultry from
Virginia, Arkansas, Wisconsin, New York, and Pennsylvania due
to China's avian influenza concerns. China's bans are without
merit and approval of the states to again export poultry to
China must be accomplished as soon as possible.
Regarding a related matter, I am sure Members of this Committee,
like the NCC, have received a volume of correspondence
regarding the issue of ``Chinese Chicken'' coming into the
United States. Our industry's ability to meet and exceed both
domestic and international standards for wholesomeness, food
safety, and quality has granted us unparalleled access to
foreign markets and solidified our ability to compete
effectively and efficiently on a global scale. We believe any
country that is able to meet the stringent safety standards set
by USDA especially those involving HACCP and pathogen reduction
programs, should be able to compete in the U.S. marketplace.
In order to be effective, free trade must operate as a two-way
street. If we expect fair treatment from trading partners based
on sound science and analysis, it is right that we afford our
trading partners the same fairness.
India was taken to the WTO in February 2013 as a way to have
India begin to open its market for U.S. poultry. A WTO Dispute
Settlement Panel was established at that time to hear the case
and determine a decision. India uses a variety of measures that
prevent U.S. poultry the opportunity to have market access.
Chief among the non-tariff trade barriers used by India is its
position regarding avian influenza. India's stance is clearly
inconsistent with the World Health Organization for Animal
Health (OIE) guidelines and the WTO Agreement on Sanitary/
Phytosanitary Measures (SPS). No country in the world exceeds
the United States in being more aggressive, more comprehensive,
and more rigorous in preventing, controlling, and eradicating
avian influenza. A conservative estimate is that if India
provided for fair market access for U.S. poultry annual sales
would exceed $300 million.
Indonesia's lack of providing market access for U.S. poultry
is another WTO case that is pending. In September 2013 the
United States joined New Zealand and other countries in the
effort to have the WTO determine if Indonesia's restriction on
importing poultry are consistent with its WTO obligations.
Indonesia uses a number of hurdles to prohibit poultry imports,
including a non-automatic import licensing scheme, quotas, and
other very difficult, costly paperwork. Having Indonesia open
its market to poultry imports would greatly benefit U.S.
exports.
Mexico has a pending antidumping NAFTA Chapter 19 dispute
against U.S. chicken leg quarters. Only three of the five NAFTA
dispute-settlement process panelists have been appointed. This
protracted procedure continues to create unnecessary
uncertainty with poultry trade with Mexico. At the same time,
Mexico has other commodity trade issues with the United States.
U.S. chicken exporters are concerned that Mexico will take
action against U.S. chicken as leverage to have other
agricultural trade issues satisfactorily addressed by the
United States. Mexico is using the dumping theory of the so-
called ``weighted average cost of production'' which the WTO
has determined to be both inconsistent with international trade
rules and economically irrational. In similar WTO cases (China
and South Africa) this theory was ruled to be in violation of
WTO rules and the obligations of WTO member states.
African Growth and Opportunity Act (AGOA) provides special
duty preferences to the countries of sub-Saharan Africa,
including the Republic of South Africa and a number of other
important and potentially-important export markets for U.S.
poultry. In 2000, the United States extended the benefits of
AGOA to South Africa and in the same year (2000) South Africa
imposed prohibitively high and illegal antidumping duties on
U.S. poultry. Since 2000, U.S. poultry exports to South Africa
have been essentially zero. Congress is now considering another
extension of AGOA for South Africa and other countries.
Earlier this year the National Chicken Council presented a
statement to the U.S. International Trade Commission hearing
regarding AGOA. NCC at the ITC hearing stated that unless South
Africa changes its policies, lifts its imposition of dumping
duties against our poultry products, and allows trade to resume
fairly and without restraint, NCC and other members of the U.S.
poultry industry will strongly oppose any further extension of
AGOA preferences to the Republic of South Africa. Fourteen
years to be illegally shut-out of a market is far too long.
Perhaps, being shut-out of the EU for 17 years is the only more
egregious situation. The time has passed for the U.S.
Government to initiate a WTO Dispute Settlement case against
South Africa. It is now time, actually well-passed time, for
South Africa to remove its restrictions against U.S. poultry.
U.S. poultry is entitled to have the opportunity to again have
market access and give South Africa consumers an option to
purchase U.S. poultry that is \1/3\ the cost of South African
chicken.
Congressional Attention Regarding Other Challenges Would Improve the
State of the U.S. Chicken
In brief, there are a number of other challenges confronting
chicken producers/processors. Chief among these issues are the need for
immigration reform, especially a strengthened and more reliable E-
verify system that allows employers to better secure a legal workforce;
the need for a much better rail transportation system that has a
greater capacity to more adequately and efficiently move grain,
oilseeds, and other feedstuffs with rail rates that are fair to both
the transporter and the rail transportation user; and the need for
greater oversight and foresight regarding the supply of propane and
related gases, especially during times of unusual cold weather
conditions.
Conclusion
While there are many issues impacting the state of the chicken
industry, I have limited my statement to what the National Chicken
Council considers to be some of the top priorities. To summarize those
priorities, I note the following:
The rules of the game must be balanced and the playing field
should be leveled to permit chicken producers and other animal
agriculture producers to more fairly compete for the supplies
of corn, especially in years of short grain supplies. Since
there is apparently no workable mechanism to adjust the RFS
when necessary, Congress must repeal the RFS for conventional
biofuels.
With respect to the USDA/Grain Inspection, Packers and
Stockyards Administration's rule addressing competition and
contracting the poultry and livestock industries, Congress
should approve defunding language, preferably permanently,
regarding the provisions where USDA went beyond the
instructions of Congress and the basic statute.
Regarding the trade promotion agreements being negotiated,
the National Chicken Council suggests, as have other groups,
that these agreements be called U.S. job-creation agreements.
Increased poultry exports as the result of implementing these
agreements would definitely result in more jobs in the poultry
industry and more family farmers growing poultry. Also, the
more specific international trade actions being taken by the
United States through the World Trade Organization must be
pursued with more intense effort, and with a heightened sense
of reaching a successful outcome in a timely manner.
The National Chicken Council, its members, and the many allied
industry companies that support poultry production, processing and
marketing look forward to working more closely with the Subcommittee
and others in Congress so that poultry producers have a better
opportunity to successfully manage the increasingly difficult
challenges and issues. Improving the state of the poultry industry not
only helps poultry companies and poultry farmers but, perhaps, more
importantly will allow consumers of poultry products to continue to
enjoy an ongoing, adequate supply of wholesome, quality chicken at
reasonable prices.
Thank you, Chairman Crawford, Congressman Costa, and Members of the
Subcommittee, for the opportunity to share the thoughts, comments, and
recommendations of the National Chicken Council. I request that the
National Chicken Council complete statement be entered into the record
of the hearing. I look forward to your questions and comments.
The Chairman. Thank you, sir.
We will now move onto our next witness, Mr. Clint Krebs,
President of American Sheep Industry Association. Mr. Krebs,
you are recognized for 5 minutes.
STATEMENT OF CLINT KREBS, PRESIDENT, AMERICAN SHEEP INDUSTRY
ASSOCIATION, IONE, OR
Mr. Krebs. Thank you, Mr. Chairman and thanks for calling
this hearing on livestock issues. Thank you. I will start over
again. Thank you, Mr. Chairman, and thanks for calling this
hearing on livestock issues.
I am pleased to visit with you and your colleagues about
the status and the priorities of the American sheep industries,
ranchers, farmers, and I might add also lamb feeders, lamb
processors, wool warehouses and wool manufacturing, and to some
degree, wool textile industries.
My wife and I ranch with our son and daughter-in-law in
eastern Oregon near the Town of Pendleton which is the home
over 100 years ago of Pendleton Woolen Mills, and I am happy to
say they have purchased our family's wool for almost 100 years.
But more proudly than that, it gives me an opportunity to be
involved in their operation where they hire in their small
operation in Oregon over 2,000 employees to process my product.
My family deals firsthand with the issues detailed in the
American Sheep Industry Association's statement that I would
like to be included in the written record. We have four sheep
herders from Peru that are highly trained and in various key
parts of our operation. We graze part of the year on Federal
lands, both BLM and Forest Service. We work daily to minimize
the stress on our livestock. We are always concerned about the
rain, grass, drought, floods, snow storms. We are constantly in
a battle to secure good prices for our lamb and wool clip, and
yes, Congressman, we struggle to pay our feed bills.
Issues such as these were important enough to the sheep
industry that 150 years ago sheep farmers and ranchers joined
together and formed the earliest national livestock association
called the National Wool Growers at that time. Decisions of our
government and increasingly decisions of foreign governments
can and do have serious impacts on my ranch and my neighbors
who raise sheep.
That is why I believe your role in representing agriculture
and livestock and Federal regulation is so critical. I am
pleased to help today and pledge the sheep industry support in
the continued fight for American families' farms and ranches.
After all, all we do is feed, fuel and clothe the world.
We need the USDA and the USTR to aggressively seek access
to export markets for American lamb. The fact that the Japanese
market has been closed to American lamb for over 10 years is
just wrong. Japan was a top market for us then and it should be
now. It must be a priority for trade negotiations to get
American lamb back in play. The same is true for several other
global markets that we are not allowed to ship to: Taiwan,
China and the European Union, for example.
The U.S. lamb market is among the most open and highly
valued markets in the world, yet it seems to me that this so-
called free trade era is a one-way street. We ask for an
aggressive stance by our government to provide opportunities
overseas for American lamb.
Wildlife Services performs another important role and we
ask for your continued support. The House voted overwhelmingly
in 2011 to support the Wildlife Services Predator Program, and
we need to be prepared for votes in the future. The witnesses
in this hearing are a great example of the program's
importance: Starling control for dairies and feedlots, feral
hog control for the pork industry, the cattlemen are dealing
with wolves and a host of other predators, and I am sure there
are many people in this room that spend a lot of time on jet
airplanes, and I know none of us wants to be on the jet that
sucks up a goose.
I again commit the support of ASI's membership to you and
as you address the needs of farmers and ranchers and
immigration reform. My wife and I spend a large amount of money
and time filling out paperwork and working to keep our herders
legal, all to make the H-2A Program work. In fact, ASI members
probably have the most legal workforce in agriculture and have
had for over 60 years.
I hope this is recognized and respected in any new
legislation. I fear that without direction from Congress our
sheep herder provisions will be lost in the rush of regulations
resulting in \1/3\ of our sheep ranchers and farmers being
forced out of business.
Volatility of price has been a key issue for sheep
producers, lamb feeders and meat companies over the past 3
years. I think it is remarkable that the USDA reported not one
complaint from the sheep industry regarding last summer's
announcement to the increase of our checkoff rate by 40
percent. Second, USDA continues to be a great partner in
marketing our lamb and wool, the National Sheep Industry
Improvement Center financial support has proven valuable in
raising money.
Mr. Chairman, thank you again for the opportunity to visit
with you and your colleagues, and I will be pleased to answer
any questions.
[The prepared statement of Mr. Krebs follows:]
Prepared Statement of Clint Krebs, President, American Sheep Industry
Association, Ione, OR
On behalf of the 80,000 family farms and ranches that produce
American lamb and wool, I greatly appreciate this opportunity to
discuss the sheep industry with the agricultural leadership of the U.S.
House of Representatives.
I am Clint Krebs, a fourth generation sheep rancher from Ione,
Oregon and I currently serve as President of the American Sheep
Industry Association (ASI), the national trade organization of the
nation's sheep industry. Mr. Chairman and Members, I also relay that
our association celebrates its 150th anniversary during our national
convention in January of 2015. ASI and our predecessor, the National
Wool Growers Association, have continuously advocated for sheep
ranchers since 1865, meaning we are among the oldest national livestock
and agriculture organizations in the United States.
The sheep industry of the United States produces lamb and wool in
every part of the country. The industry provides nearly a billion
dollars in farm and ranch gate sales to the American economy, and is a
mainstay of the many rural communities in which sheep ranchers and
farmers are foundational members.
We provide snapshots of our lamb and wool markets over the past 5
to 10 years showing revenue to sheep farms and ranches. Over the 5
years to 2013, U.S. lamb market experienced significant volatility,
gaining 80 percent to record-highs in 2011, only to slump by 35 percent
the following 2 years. By mid-2013, lamb prices began a rebound and
gained through the first quarter of 2014, back to 70 to 80 percent of
their 2011 highs.
The lamb industry has hopefully entered a lasting higher-demand
era, largely supported by continued tight supplies and steady lamb
prices. In early 2014 it is evident that the slow recovery in U.S.
incomes, high-priced protein substitutes, and recovering lamb demand
are supporting current slaughter rates and excellent quality.
The Livestock Market Information Center sees ``cautious optimism''
for sheep producers in 2014. While we can obviously do better, we are
headed in the right direction.
U.S. wool market prices saw a trend similar to the lamb market.
Prices hit record-highs in 2011 only to decline steadily through the
following 18 months. In the 3 years prior to 2011, average U.S. clean
wool prices gained over 200 percent from $1.50 per lb. to $4.50 per lb.
In 2011, wool prices began a steady downturn with prices falling 22
percent by the end of 2013.
Volatility of prices has been the key issue for sheep producers,
lamb feeders and meat companies. I would add that the dramatic run up
in feed and input costs, particularly in 2012, has led to an intense
struggle for producers to cover expenses.
This hearing provides a key opportunity to relay what our industry
is doing to strengthen production and steady markets, as well as
several topics in which Congressional support is critical.
Our association petitioned the U.S. Department of Agriculture with
a proposed checkoff order which was successfully implemented in 2002 as
the American Lamb Board (ALB), a lamb industry-wide research,
information and promotion program. In 2013, the Department fulfilled
our industry's request for an increase in the assessment rate of 40
percent! We believe this critical funding, provided by lamb producers,
feeders, processors, and export companies, will lead to improvements in
the lamb business.
The immediate use of the additional funds is centered on a Lamb
Industry Roadmap plan as announced by the Lamb Board this January in
coordination with sheep industry associations and lamb feeding and
processing sectors. This 3 year initiative is focused on improving lamb
quality and demand, sheep production and efficiency, and industry
communication.
We wish to recognize USDA's Agricultural Marketing Service (AMS)
for several areas of cooperation focused on addressing lamb market
volatility and production. In addition to oversight of the lamb
checkoff, AMS also oversees the National Sheep Industry Improvement
Center. Amongst other collaborative initiatives, the Center provided
grant funds matched by industry contributions for development of the
Lamb Industry Roadmap. AMS is also in the process of addressing a
requested update to the Mandatory Price Reporting system for lamb,
which includes consideration of reporting requirements and thresholds
for domestic lamb companies and lamb importers.
ASI supports several changes that have been incorporated in the
past year and regulatory changes yet to be published in 2014. AMS will
be able to finalize a standard for instrument grading of lamb carcasses
and we anticipate a tenderness standard in the near future.
We were concerned with the lack of AMS market reports for live
animal and meat during the shutdown last October, it served as a
reminder of how much our industry relies on AMS Market News. AMS Market
Reports should be classified as an essential service in case of a
repeat of last October, and we fully encourage funding the voluntary
and mandatory reports that our industry depends on. Finally, we offer
our full support for reauthorization of the Mandatory Reporting for
Livestock due in the fall of 2015.
Mr. Chairman and Members, the following market access issues would
be critical to accomplish for the future viability of sheep farmers and
ranchers:
Access to foreign markets for American lamb. Japan was a
significant export market for American lamb until the BSE issue closed
that market for our lamb at the same time it was closed for American
beef. Unfortunately, we are still locked out of the Japanese market. In
fact, access to Japan for American lamb is the lone benefit of the
entire proposed Trans-Pacific Partnership (TPP). Mexico and Canada are
already our largest lamb export destinations and we have no intentions
of trying to sell lamb into Australia and New Zealand.
We point out that the United States is one of the most open and
highly sought after lamb markets in the world. There are no
economically important barriers to these four proposed TPP countries
trading their lamb in America. In fact, \1/2\ of our lamb consumption
is now imported compared to just 11% in 1991.
Unlike the European market, which is highly restricted with tariff
rate quotas up to 100% ad valorem, the American market is essentially
wide open for lamb. Additionally, this winter Uruguay was approved for
export of lamb to our market. We have asked for lamb market access to
Taiwan, Korea, China, the European Union, and Japan. As an American
sheep producer facing unrestricted global competition in my home
market, I would ask that every effort be made by the United States
Government to fight for American lamb access to the markets of our
trading ``partners'', and I encourage Congress to support that request.
To borrow a phrase from my ``fowl'' friends, what is good for the goose
is good for the gander.
ASI works with the wool industry to export 50 percent or more of
our wool clip every year to China, India and the European Union,
further proof that we can compete if given a chance. However, one wool
trade issue of concern is the position of the Vietnamese and Australian
Governments in the Trans-Pacific Partnership regarding a single
transformation rule on wool textiles. The bottom line for sheep
producers and our American wool mills is that allowing such a position
would essentially allow Chinese wool yarns and fabrics to flow into
Vietnam for assembly and receive TPP trade benefits as if of Vietnamese
origin. We sell \1/2\ of the American wool clip to domestic mills,
including the companies that produce the uniforms and socks for all
American service men and women, therefore the textile trade is
important to our industry and to America.
We commend the Agriculture Committee for the leadership and
commitment to secure the farm bill this year. We welcome the
authorization of the Livestock Indemnity and Livestock Forage programs.
California drought and the killer blizzard in South Dakota last fall
has sheep producers in those two states, and others, already meeting
with county Farm Service Agency officials. Our organization has met
with the Department staff sharing our commitment to the proper
implementation of new provisions, particularly livestock indemnity
including Federal reintroduced or regulated predators, including avian
predators. A sheep producer in Idaho last year had over 150 animals
killed in one night by wolves despite two herders and several livestock
protection dogs present. This is just one example of why we supported
the new provision in the indemnity program. I can also relay that
producers have no resource whatsoever when eagles, vultures and ravens
start killing young lambs. All too often federally protected birds
stalk the sheep when producers move the flock to avoid the kills.
The Livestock Risk Protection program for lamb (an industry owned
product) is the sole price-risk management option for the nation's lamb
producers and feeders. The pilot program was launched in 2007 to
provide price-risk protection in the event of an unexpected price
decline in the lamb market. Hundreds of thousands of lambs were insured
during the pilot period. The Federal Crop Insurance Corporation (FCIC)
board plans to receive a presentation from the sheep industry next week
on a recommended revision of the product, we hope the board will be
able to approve the recommendations and that sales can begin again
soon.
Sheep and lamb losses to predators and predator management costs
are the second largest expense to sheep operations; second only to cost
of feed. We thank the Committee for its longstanding support of USDA
Wildlife Services. Wildlife Services provides an invaluable tool to
livestock producers attempting to deal with wildlife damage. Our
industries provide many millions of privately owned acres of habitat
for public wildlife, and a professional resource to assist or advise
farmers and ranchers is absolutely critical. I am pleased to share that
national livestock organizations are once again united in defending
Wildlife Services from misguided attacks and are joined by a coalition
of pilots, county and state governments, agriculture organizations, and
sportsmen, just to name a few. A joint letter signed by 169
organizations was delivered to Congress this March representing perhaps
the broadest coalition of support for any USDA program.
Another challenge in the wildlife arena poses perhaps the largest
threat to American sheep production, and that is the U.S. Forest
Service and Bureau of Land Management's consideration of further
constraints on Federal grazing allotments for sheep.
In 2010, the U.S. Forest Service prohibited 13,000 sheep from
grazing on their historic grazing allotments within the Payette
National Forest in Idaho. This action drove one ranch out of business
entirely and drastically reduced the operations of three others. The
reason for this reduction was an obscure regulation of the National
Forest Management Act requiring each National Forest to maintain
``minimum viable'' populations of all vertebrate species found there.
Environmental activists argued that by allowing domestic grazing to
continue, the Forest Service violated this regulation and bighorn sheep
might contract a pneumonia-like disease from domestic sheep,
threatening their ``viability''.
Region 4 of the U.S. Forest Service announced this month that by
February 2015, analysis and management decisions regarding sheep
grazing allotments would be made in the states of Utah, Wyoming,
Nevada, and Idaho. Over forty percent of the sheep industry is reliant
on Federal grazing for a portion of the grazing season, meaning the
impact of west wide decisions to eliminate grazing would be
catastrophic to ranches, not to mention the loss of lamb and wool
handling operations. USDA's Agriculture Research Service is heavily
involved in research to identify the causes of bighorn diseases and
their transmission factors. Sheep producers strongly support this
research and have provided additional funding of nearly $100,000 over
the past 18 months.
This wildlife issue joins the concerning trend of managing Federal
lands by single species rather than multiple use (Sage Grouse, wild
horses and bighorns as examples). Much like the Wildlife Services
funding debate in the U.S. House of Representatives, we share this
grazing and habitat controversy in anticipation of seeking the support
of agriculture leaders in Congress on behalf of American ranch
families.
I would be remiss not to mention that fully \1/3\ of our animals
are shepherded by immigrant sheep herders. Our industry has benefited
from the H-2A guest-worker program since the 1950's and utilized
several procedures to make the program work. The sheep industry likely
has the most documented and truly legal workforce of any in
agriculture, achieved annually at great expense and with much
paperwork. We ask that any legislation on immigration reform codify the
procedures we have long used.
Again, thank you for securing approval of a farm bill containing
key provisions for America's sheep ranchers and farmers, disaster
assistance, the sheep production and marketing grant program, and
Country-of-Origin Labeling for lamb.
We appreciate the opportunity to share the current status of the
nation's sheep producers, the market outlook, and the numerous
challenges these families face in providing food and fiber to the
world.
The Chairman. Thank you, Mr. Krebs.
Moving on now, Mr. Matthew T. Cook, President and CEO,
Norbest, Incorporated, on behalf of the National Turkey
Federation. Mr. Cook, you are recognized for 5 minutes.
STATEMENT OF MATTHEW T. COOK, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NORBEST, INC., MORONI, UT; ON
BEHALF OF NATIONAL TURKEY FEDERATION
Mr. Cook. Good morning, Chairman Crawford, Congressman
Costa, and Members of the Subcommittee.
My name is Matt Cook, and I am the President and CEO of
Norbest, an 84 year old turkey cooperative based in Moroni,
Utah, and a current member of the National Turkey Federation's
Executive Committee. Thank you for inviting me.
I have spent my professional career in and around the
turkey industry, and I am proud of the industry's
accomplishments and growth. Today, I am here on behalf of the
National Turkey Federation. NTF represents all segments of the
$29 billion industry which includes 95 percent of U.S.
processors, growers, distributors and suppliers.
From 2006 to 2013, U.S. turkey producers watched their
average feed price cost increase over 125 percent. To
compensate for higher costs of feed wholesale prices had to
increase and they did. But while feed costs more than doubled,
average turkey prices increased by only 26 per pound. The cost
increases from feeding turkeys with rising cost of corn and soy
milk increased the cost to consumers by $1.3 billion last year
alone.
The total cost increase for all foods was much higher, but
that is just on average. Twice in periods lasting about a year
each an unexpected oversupply of turkey brought prices down,
yet our feed costs remained uncommonly high. In those years,
all throughout the turkey business, hundreds of millions of
dollars are lost. Most companies responded to this crisis by
reducing production. At Norbest, we had to cease all production
for 3 months.
To this day, on average, feed and food prices remain
higher. What Congress does impacts my bottom line, so I ask
this Committee to remain vigilant about how Federal energy and
agricultural policy play a key role in shaping supply and
demand forces that influence food costs. We in the turkey
industry are on an eventual losing end when our product prices
go up because of higher costs, and thus consumers pay more and
eventually buy less. Please insist that your colleagues in
Congress consider the full consequences of the policies put in
place in both the renewable energy and agricultural arenas.
We continue to be challenged with a multitude of issues
that impact those of us in the turkey business. As previously
mentioned, the Renewable Fuel Standard in its current form has
and will continue to negatively distort feed costs for turkey
producers until the policy changes. We commend EPA for its
proposal to lower the 2014 RVO levels, but the responsibility
still falls back on Congress to find a lasting solution to this
rigid policy.
The proposed modernization of poultry slaughter inspection
rule has been scrutinized from every perspective. We feel
strongly that science and data compiled over the last decade of
the 25 poultry plants currently operating under this system
clearly demonstrate that the food produced at these plants is
at least as safe as that being produced in traditional poultry
plants while maintaining high worker safety standards.
NTF is working to improve a proposed FDA safety rule for
feed mills. There is no need for a detailed expensive
regulatory burden, when the owner of the animals and
manufacturer of the feed are one and the same, as is the case
with our vertically integrated industry. In cases like ours,
the economic incentive to produce high quality safe feed is
greater than any possible regulatory incentive or disincentive.
FDA has written a rule in a way that exempts one portion of
animal agriculture, primarily cattle feedlots, while requiring
most other segments, especially poultry and swine, to prepare
the costly plans.
Tomorrow, NTF will testify in the Senate, regarding the
propane shortage that caused over 20 states to declare a state
of emergency over skyrocketing prices and fear that there was
not enough propane to last the winter. We appreciate the
leadership of Ranking Member Collin Peterson in evaluating this
year's dangerous propane shortage. We survived this year, but
the fundamental problems still exist. Once winter conditions
kick in, it is too late to fix the shortage without dramatic
government intervention.
In the interest of time, I would just briefly like to
mention some additional issues facing our industry. Immigration
reform. There is currently no one bill that is a silver bullet,
but it is time to resolve the immigration debate for the good
of the country. In order for companies like Norbest to ensure
the legal hiring of enough qualified workers using a trusted E-
Verify program is essential and critical to long-term success.
We were disappointed that GIPSA provisions were not fixed
in the farm bill and look forward to working with Congress to
correct this. We are very troubled by the news that EPA and the
Corps of Engineers recently proposed a rule to revise the
definition of waters of the United States under the Clean Water
Act.
Though I know I have emphasized areas of concern, I want to
acknowledge that certain government programs have and continue
to play a positive role in the poultry and livestock industry.
We anticipate the measures taken in the 2014 Farm Bill to
expand the disaster assistance program. The Livestock Indemnity
Program is a critical program for our industry, and with
program expansion, turkey growers will be able to utilize the
program in the event of a disaster. We also continue to support
the EQIP and REAP programs. As implementation begins, we look
forward to working with the Committee in the area of oversight.
Thank you again, and I will be happy to answer any
questions.
[The prepared statement of Mr. Cook follows:]
Prepared Statement of Matthew T. Cook, President and Chief Executive
Officer, Norbest, Inc., Moroni, UT; on Behalf of National Turkey
Federation
Good morning, Chairman Crawford, Congressman Costa, and Members of
the Subcommittee. My name is Matt Cook, and I am the President/CEO of
Norbest, a grower owned cooperative based in Moroni, UT, and current
member of the National Turkey Federation's Executive Committee. Thank
you for inviting me.
I have spent my professional career in and around the turkey
industry and am proud of the industry's accomplishments and growth. For
the last 3 years, I have been the President/CEO of Norbest, a turkey
processing co-op founded in 1930. Membership in the Norbest cooperative
has changed a few times over the last 80 plus years of its existence,
as local farmer co-ops have merged, dissolved, or changed focus. Today,
I am here on behalf of the National Turkey Federation. NTF is the
national advocate for all segments of the $29 billion turkey industry
that provides services and conducts activities that increase product
demand enhancing members' ability to profitably provide wholesome,
high-quality, nutritious products. The NTF represents integrators,
processors, growers, and allied members. There is no one-size-fits-all
model in the turkey industry. We rely on the important grower
relationships along with the rest of our allied members to remain
successful. We have family owned companies, grower owned cooperatives,
and large, agriculturally-diversified international companies that all
play a critical role in determining NTF policy at each level, all the
way up to our Executive Committee.
Feed Costs and Industry Profitability
From 2006 to 2013, U.S. turkey producers watched their average feed
costs increase from 22.7 to almost 51 per pound of turkey raised, a
125 percent increase. To compensate for the higher cost of feed,
wholesale prices had to increase--and they did. But while feed costs
more than doubled, average turkey prices increased by only 26 per
pound. The cost increases from feeding turkeys with rising costs of
corn and soy meal increased the costs to consumers of $1.3 billion last
year. The total cost increase for all foods was much higher.
But that's just on average. Twice in periods lasting about a year
each, an unexpected oversupply of turkey brought prices down--yet our
purchase of corn and soy meal to feed turkeys remained uncommonly
costly. In those years, all throughout the turkey business, hundreds of
millions of dollars were lost. Most companies responded to this crisis
by reducing production, but at Norbest we had to cease all production
for 3 months. As feed supplies were reduced, the short-term lower
consumer prices evaporated. And to this day, food costs, on average,
remain higher as costs to feed turkeys remains high.
What Congress does impacts my bottom line, so I ask this Committee
to remain vigilant about how Federal energy and agricultural policy
play a key role in shaping supply and demand forces that influence food
costs. We in the turkey industry are on the eventual losing end when
our product prices go up because of higher costs, and thus consumers
pay more and eventually buy less. Please insist that your colleagues in
Congress consider the full consequences of the policies put into place
in both the renewable energy and agricultural arenas. The policies of
the last 8 years have been strongly biased in the direction of higher-
cost consequences with an unfair burden on turkey producers and our
customers, the American food consumer.
We also continue to be challenged with a multitude of issues that
impact those of us in the turkey business and look forward to working
with each of you to address these issues. I have outlined below a list
of priority issues that we remain focused on fixing.
Future Challenges
RFS
As previously mentioned, the Renewable Fuel Standard in its current
form has, and will continue to negatively distort feed costs for turkey
producers--as well as the rest of livestock producers--if the policy
does not change. We commend EPA for its proposal to lower the 2014 RVO
levels, by acknowledging that a problem exists with the current policy.
The inflexible RFS mandate continues to have a detrimental impact on
the economy and makes feeding animals a risky business because our
industries are simply not competing on a level playing field. So while
EPA's actions are a step in the right direction, the responsibility
still falls back on Congress to find a lasting solution to this rigid
policy. Turkey producers feed corn and soybean the season after
harvest, and especially this past season, we are still paying high
prices for corn while the corn producers saw their market drop from the
artificial oversupply of the ethanol mandate of the RFS. The flawed
policy from RFS will cause continued volatility that distorts feed
prices unnecessarily. Let's be clear, we are not advocating a policy
that would keep feed costs artificially low; we are just seeking a
policy that allows true market forces to act on feed pricing.
GIPSA
NTF was disappointed that the provisions that clarify Grain
Inspection, Packers and Stockyards Administration (GIPSA) authority
were not corrected in the farm bill. While we applaud the
Administration for reducing the scope of its final rules that came out
of the 2008 Farm Bill on production and marketing, we remain concerned
that new regulations will result in negative impacts on farmer and
processor relationships. We hope this Committee will remain committed
to finding a vehicle to put this topic to rest soon.
Modernization of Poultry Slaughter
The proposed Modernization of Poultry Slaughter Inspection rule has
been scrutinized from every perspective, and we want to commend USDA
for its efforts to enhance food safety, maintain the safety of poultry
plant workers and FSIS inspectors while creating more jobs in rural
communities. Starting with implementation of the HACCP rule in the late
1990s, continuing efforts to further improve the U.S. meat and poultry
inspection system has been one of this nation's finest examples of
nonpartisan, public-interest policymaking. The U.S. turkey industry
understands and recognizes the complexity of this rule, but we feel
strongly that science and data complied over the last decade at the 25
poultry plants currently operating under this system clearly
demonstrate that the food produced at these plants is at least as safe
as that being produced in traditional poultry plants, while maintaining
high worker safety standards. We appreciate the Chairman and Ranking
Member of this Subcommittee and the full Committee for their support
for this proposed rule.
Feed Mill
NTF is working to address concerns with a rule that FDA recently
proposed as part of Food Safety Modernization Act (FSMA). The proposed
rule requires mills producing animal food to prepare detailed and
expensive preventive control (food safety) plans that incorporate
current good manufacturing practices. We understand the intent is to
protect buyers from low-quality, unsafe feed, but are concerned it
places an additional burden that is not justified in the case of the
turkey industry. Because our industry is vertically integrated, where
the owner of the mill and the turkeys are one in the same, the economic
incentive to prepare high quality, safe feed effectively negates the
need for this regulation. However, FDA's proposal limited the exemption
to cases where there was common ownership of the mill, the animals and
the land on which the animals are raised. This exempts one portion of
the animal producing industry (primarily cattle feedlots) while
requiring most other segments (especially poultry and swine) to prepare
the costly plans. We agree the exemption currently proposed by FDA is
appropriate; it just needs to be expanded. In recent industry comments,
NTF requested that FDA amend the definition of farm in the proposed
rule or otherwise expand the types of mills eligible for an exemption
to address production issues as they pertain to the turkey industry.
Propane
What started as a Midwest propane supply shortage developed into a
larger, national discussion with over 20 governors declaring a state of
emergency, scrambling to secure adequate supplies to meet the need
during the critical winter months. Why did this occur? A large, late
and wet corn harvest along with an early start to the cold season
started the drawdown in propane storage, but fuel stocks were never
able to rebound when early sub-zero winter weather set-in across much
of the Midwest and Northeast, hindering propane gas movement by
pipeline and rail. Additionally the increase in exports of propane has
made it more difficult to get the needed supply to many areas around
the country. This ultimately hit the people in rural communities that
heat their homes with propane along with those in the turkey business
that need propane to keep turkey barns warm in the winter directly in
the pocket book. The turkey industry is appreciative for the leadership
of Ranking Member Collin Peterson and his staff this past winter to
elevate and step in to avert this year's dangerous propane shortage.
While there are many things that can be done, at the very least, the
government should establish an early warning system to allow time to
adjust before our hands are tied and next winter's danger presents
itself again.
Immigration
The turkey industry supports comprehensive immigration reform that
includes the following policies and provisions that will maximize
benefits to the turkey industry and ensure a strong and durable
immigration system that meets the needs of the U.S. economy. Most
turkey plants are located in rural, low-unemployment areas. To fully
staff these plants, the industry must recruit from outside their local
area and, in many instances, must rely on first-generation Americans.
Practical immigration reform is important to the industry's future.
There is currently no one bill that is a ``silver bullet,'' but it is
time to resolve the immigration debate for the good of the country. In
order for companies to ensure the legal hiring of enough qualified
workers, using a trusted E-Verify program is essential, and critical to
long term success.
EPA-CWA
Before closing, I must mention that EPA and the U.S. Army Corps of
Engineers recently released proposed rule to revise the definition of
``waters of the United States'' under the Clean Water Act. Despite the
agencies' stated aim that the proposed changes will clear up confusion
and have little impact on agriculture, we remain concerned that the
measure may greatly expand the universe of farms facing new permitting
and regulatory requirements.
How Government Can Help
Though I know I have emphasized areas of concern here, I want to
acknowledge that certain government programs have, and can continue, to
play a positive role in the poultry and livestock industry. We
appreciate the measures taken in the 2014 Farm Bill to expand the
disaster assistance program. The Livestock Indemnity Program (LIP) is a
critical program for our industry and with the program expansion turkey
growers will be able to better utilize the program in the event of a
disaster. We also continue to be supportive of the Environmental
Quality Incentive Program (EQIP) and the Rural Energy for America
Program (REAP) as these programs continue to provide additional
assistance to turkey growers as they work to meet the needs of state
and Federal regulations. As implementation begins, we look forward to
working with the Committee in the area of oversight.
Thank you again for the opportunity to discuss the state of the
turkey industry. I will be happy to answer any questions you may have.
The Chairman. Thank you, Mr. Cook.
I appreciate all the witnesses that have taken time to be
with us today.
We will now begin our round of questioning. I am going to
recognize myself for 5 minutes to begin.
Mr. Miller, I know you were present when I asked this
question to Dr. Glauber, but as I said, I wanted to ask it
again to the member groups. I know there are those advocates of
mandatory Country-of-Origin Labeling that argue that there is a
premium to be paid for that. Could I get your input, your
thoughts on if that were the case, why were producers not
engaged in that marketing practice years before this was
mandated?
Mr. Miller. Again, Mr. Chairman, it is a good question. I
would say that is a fair assumption. You know, we are obviously
sensitive to whatever our customers want, what our customers'
needs are. They are the closest to the consumer, so they are
getting the feedback from the consumers through whether it is
retail or food service channels. So, we are obviously getting
that feedback in a pretty normalized basis.
There has been no evidence that the consumer is demanding
Country-of-Origin Labeling of meat and poultry, so therefore,
to your point, originally, we hadn't gotten any feedback that
is necessary.
The Chairman. Okay. Let me follow up on that, since we are
on this subject. I know it is difficult to implement,
commingling being one of the most, probably the most onerous
areas with regard to implementation of mandatory COOL. Could
you comment on that--and maybe just enlighten us from your
perspective for those less familiar with beef packing, just
sort of expand on that a little bit and explain some of the
difficulties that you run into?
Mr. Miller. Yes, it really affects operations in three
different phases. If you think of the front end of the plant.
In the front end of the facilities, you end up having to
increase your amount of sortation and space that is necessary
to hold the livestock because you are bringing in various--
whether it is product to U.S., product to U.S. Canada, product
to U.S. Mexico, so you have the various different animals that
are coming in the front end of the facility.
Once you actually get into the plant, you end up having to
deal with a lot more grade changes and cost to process, cattle
or hogs, whatever that may be. The down time to stop through
the segregation ends up costing us a lot of money as we have
several team members that are standing around through the grade
changes.
On the back end of the plant, the third phase, there is
additional space that is needed to segregate, whether that is
the various stock keeping units, the SKUs, whether it is
additional capital that is needed to expand material handling
out the back of the plant, too. So there are truly three
different phases that are affected by MCOOL.
The Chairman. Thank you.
Mr. Smith, I find that your operation that you are
representing is really pretty fascinating. You call it vertical
integration, closed loop, whatever you want to call it, it is
very diverse obviously, and you described it in some detail,
but I find it ironic that while your beef operation is made
less efficient through the implementation of mandatory Country-
of-Origin Labeling, I would think that your farming operation
then becomes vulnerable to those retaliations from our
neighbors to the north and south.
Talk about that a little bit and give me your perspective
on that.
Mr. Smith. And Congressman, that is a very real concern of
the companies as well. If the WTO sides with Canada and Mexico,
and if they do in fact have an opportunity to impose tariffs, I
mean, I believe they will follow a similar concept that we in
the U.S. use, a carousel type system where they are going to go
after and preferentially target other commodities, commodities
other than beef, pork, poultry, and so there is a very real
potential it will have a negative impact on those other
commodities, those fruits, nuts, vegetables that we would
potentially try to market into those countries as well.
The Chairman. Excellent. I am not going to ask anymore
questions of you because Mr. Costa will direct some questions
your way, so yes, some really hard ones.
So, I want to shift gears just a little bit and talk about
transportation, and Dr. Hill, you touched on this. Regarding
transportation regulations that you mentioned, does the waiver
requirement to take a 30 minute break all together waive that
requirement to take a 30 minute break all together, or does it
simply prevent drivers from having to include loading and
unloading times in their calculations to the 8 hour period?
Dr. Hill. Thank you. Right now we don't have a waiver. We
had a waiver last year during the 3 months of hot weather, and
we thought we were going to have a 2 year waiver. That hasn't--
my understanding, that hasn't been approved, so we may ask for
a 90 day waiver for the next hot months. The question you
asked, it does include the time it takes to load and unload
livestock.
The Chairman. I understand. All right. Thank you, Dr. Hill.
I now recognize Ranking Member Costa for 5 minutes.
Mr. Costa. Thank you very much, Mr. Chairman.
Our colleague, Congressman McIntyre, has another committee
that he needs to be at, so I am going to pass at this point
after the next Republican gets a chance to ask his questions
and change the order, so as to allow Mr. McIntyre to ask his
questions and then get to that committee.
Mr. McIntyre. Thank you, Mr. Chairman.
I have a--we are going into a markup in a Armed Services
subcommittee, so I appreciate the consideration.
For the record, I have asked that the subcommittee staff
submit a question I had for Panel I, for Dr. Glauber,
requesting a response in writing in the next 7 to 10 days, and
I want to appreciate the subcommittee staff on that, and that
question will be submitted to him.
Second, for this panel, I just have one question. Mr.
Miller, as you know, the USDA recently announced a proposed
plan to require mandatory reporting of PED virus cases by pork
producers and potentially tracking of animals. Given that Tyson
Foods is the largest purchaser of independent hogs in the
country and knowing the impact that PED virus has had on the
pork industry, do you agree that USDA should go to great
lengths to include the pork industry in the formation and
implementation of the regulation and that the regulation should
not be subject to any sort of unreasonable time constraints in
order to get the program correct?
Mr. Miller. Yes, Congressman, you are right we do procure
about 97 percent of our livestock that are fabricated through
our facilities on the outside, so we are the largest purchaser
of independent livestock in the open market. I would say on
that, in our view, we don't need producers forced to deal with
anything that would potentially create artificial disruptions,
so therefore, reporting programs, they need to be practical at
the farm level. So the key here is to ensure that they are
practical. Obviously, the reporting is good that we are going
to get into the reporting process, but it needs to be practical
at the farm level so it doesn't disrupt commerce either.
And I would leave it to Dr. Hill to maybe get into a little
bit more detail because he is obviously representing the NPPC,
but from a packer point of view, it is key that the reporting
program needs to be practical at the farm level.
Mr. McIntyre. Thank you. Did you want to add any subsequent
comment to that in the remaining time, Dr. Hill?
Dr. Hill. We have been working with the USDA on this rule,
trying to cooperate with them. Our point is we have had this
disease for a year, and it seems now that USDA wants to get a
rule in place and implement very, very quickly in a matter of
just weeks, 2 or 3 weeks here, and we feel as though to get the
buy in of the industry, we need to progress a little bit slower
and make sure that we have a program that is when we implement
it, it really does what we want it to do, and that is to help
identify where the disease is and to control the spread of the
disease. We don't think that it would be beneficial in any way
to limit producers ability to move livestock.
Mr. McIntyre. All right. Thank you.
Thank you to my colleague Mr. Costa, and thank you, Mr.
Chairman.
The Chairman. The gentleman yields, and I recognize the
gentleman from Iowa, Mr. King, for 5 minutes.
Mr. King. Thank you, Mr. Chairman, and I appreciate the
witness' testimony, and I turn first to Mr. Miller, and I am
going to reminisce a little bit. I am going to ask whether you
will agree with my recollection of the sequence of events, and
that is that we passed a farm bill that was--actually we
thought it was 2007 but it actually is the 2008 Farm Bill. The
COOL regulations that were testified about here were
implemented in September of 2009, and my recollection of that
language in the 2008 Farm Bill, was that it was written vaguely
in its requirements so that there would be an option for the
packers to label, say born, raised, and harvested in a location
as opposed to the specificity of those distinctions, and we
left the passage of that Farm Bill in 2008 with the idea that
it was not going to put a constraint on our packers.
Do you recall those events? I am just going to ask if you
would relate the balance of that or maybe ask me to finish it,
whichever you prefer.
Mr. Miller. Congressman, I think I am going to have you
finish that one.
Mr. King. Okay. I will. Thanks for the question.
Mr. Miller. Yes. I send the question back to you.
Mr. King. And my recollection is that we left this
Committee and the floor passage of the 2008 Farm Bill with
confidence that COOL was resolved in such a way that it was not
going to put a bind on the packers, and I recall a letter that
was signed by the chairs of the respective committees, House
and Senate Agriculture Committees to the packers that said you
are not complying with our intent, not the language, but with
the intent, and my recollection is that the packers generally
agreed that they would comply with the stated intent of the
letter, which is why we are talking about September 2009. Any
of that inconsistent with your recollection, Mr. Miller?
Mr. Miller. Mr. Congressman, I would agree. We never
believed that the mandatory Country-of-Origin Labeling program
was necessary because there was never a food safety issue, nor
for our retailers and consumers who never demanded it, and with
the initial program, the flexibility that allowed us to
commingle, we could still run our operations to a point that we
didn't have to incur additional breaks or sortations. With the
current law, the current process, that is not practical
anymore, so that those additional costs are ultimately borne on
the consumers because those costs are pushed back upstream.
Mr. King. And I would say that, as I have watched this, it
was relatively simple in 2008, and it has gotten more and more
complex since then, and to this point that I made to the
earlier witness, that if this Administration would come out
strongly in favor of the repeal of COOL, we could get this done
and get it to the President's desk, and a lot of money is being
spent otherwise. I just appreciate your attention to this.
But I would like to turn then to Dr. Hill, and your
testimony on PEDv and where we need to better understanding of
the depth of that now, but what is the progress that is being
made on vaccine?
Dr. Hill. We do have an experimental vaccine there from
Harris Labs, but that vaccine is nothing effective if you
vaccinate a sow and then hope to protect the pigs. It does seem
to have some value in these chronic herds, helping those
chronic herds recover, but this is a Corona virus. Corona
viruses are very difficult to develop a good immune response
to, so it is going to take a lot of effort and a lot of time.
We know that there are at least four major biologic
manufacturers working diligently at trying to come up with a
vaccine. I know one company, for example, just told me they had
26 scientists working on this. Of course, it is a big plumb if
they get one, they will have a huge market.
Mr. King. And if we are not able to develop a vaccine that
is effective, what is the next best method?
Dr. Hill. Well, then things that producers are doing now,
biosecurity, ensuring that feed stuffs are not involved in the
transmission of this disease, which now we know they are. The
Canadians proved that for us, so there is a lot of effort in
looking at feed stuffs and making sure that that is not a
source of transmitting the disease over long distances.
We know that when the virus gets into a herd and we have
adjacent herds close by that there is so much virus produced
that it is very difficult to keep it just moving laterally, but
we have had this virus jump miles and miles in unrelated herds
early, and we think that could have been from feed.
Mr. King. Thank you, Dr. Hill.
I just want to ask a quick question of Mr. Roenigk, and I
didn't hear real fans of the RFS in this particular panel,
which I know it was just an odd anomaly. However, your
testimony, you testified to the inflexibility of the Renewable
Fuel Standard, and when I heard that, I want to give you an
opportunity to express that a little bit because even though
the Renewable Fuel Standard by statute is relatively
inflexible, the EPA has added their own flexibility to it and
rationed it down dramatically.
So, do you have any comments you would make as to the
creation of flexibility by the EPA on the Renewable Fuel
Standard?
Mr. Roenigk. As we are all aware, there were two
opportunities, or two requests for waivers, neither of which
were successful from our viewpoint. EPA, as your question
suggests, is now proposing an adjustment to the Renewable Fuel
Standard. As Congressman Costa said, the Administrator feels
this is one of her most difficult decisions. I would be glad to
help her make that decision if she would allow me. I think it
is a rather easy decision, but we hope the decision is correct
and that there will be some recognition not just of the blend
wall but the damage that it has done. Not just high prices but
the volatility of corn.
Mr. King. Maybe we could join together in agreeing that it
was the largest corn crop ever, however.
Thank you, Mr. Chairman. I yield back.
The Chairman. The gentleman yields back.
I now recognize the Ranking Member for 5 minutes.
Mr. Costa. Thank you very much, Mr. Chairman. I want to go
to Mr. Smith.
Mr. Smith, you, I thought, did a good job of highlighting
the impacts of the drought, especially the regulatory impacts
of the drought to California and the production of agriculture
products that the fruits and vegetables that we do so good, not
only to Harris Ranch but to agricultural producers throughout
California.
I want to go back to MCOOL. At Harris Ranch, what do you
believe you are going to have to do in order to comply with the
MCOOL rule based upon obviously what happens with the WTO
ruling here later this year?
Mr. Smith. Well, Congressman Costa, we are currently in
compliance with the rule and even the revised rule. It has
actually added some additional negative impacts on our company
in terms of the additional----
Mr. Costa. How much on costs? Have you done an estimate on
the cost?
Mr. Smith. No, sir, not direct estimate on the cost of the
company, but it is--and you know what, Congressman, I will--we
will actually run those numbers and get them back to you, but--
I can have that number.
Mr. Costa. If you could provide them for the Subcommittee,
I think it would be helpful.
Mr. Smith. Yes, sir.
[The information referred to is located on p. 106.]
Mr. Costa. It would certainly give us a snapshot as to what
a premium-sized packing operation that you folks run in
California is costing you.
You heard my statement earlier on, if in fact the ruling is
adverse, maybe the point there then is an opportunity to say
stop and let's take another look at this. Would you agree?
Mr. Smith. Oh, wholeheartedly, sir. I mean, I think some
common sense needs to prevail somewhere in this whole process,
and if the ruling does come down negatively or in favor of
Mexico and Canada, I would encourage somebody to put the breaks
on.
Mr. Costa. No, I would concur, and your comments about the
potential retaliatory impacts in using the example of the
Mexican truck situation a few years back is clearly one that we
could see both Canada and Mexico acting on.
I know you deal with a number of different issues within
your purview, but we just passed the farm bill. Did you get a
chance to look at any of the livestock disaster relief elements
within the bill?
Mr. Smith. No, I know it is very helpful, and I know a lot
of producers in the State of California, or I would have to
assume that a lot of those producers would take advantage of
that financial opportunity extended by Congress, but once
again, I don't have a number for you, Congressman.
Mr. Costa. I would like to move on to GIPSA.
Mr. Smith. Yes, sir.
Mr. Costa.--and impacts from your perspective on GIPSA. I
wasn't here to ask the last question from Dr. Glauber, but the
Chairman was. It has been troubling I know for you and others,
not only the beef packing industry but the poultry processing
facility. Would you care to comment?
Mr. Smith. Yes, Congressman. I think that the two issues
that were really highlighted by the proposed rule that came out
of Mr. Butler's office were related to alternative marketing
agreements. As you mentioned in your introduction, I manage our
producer alliance. We call it our Partnership for Quality. We
are currently working with 70 of the most progressive ranching
families in the western United States. The majority of those
are in California. We offer them incentives in the form of
premiums that we pay for using certain genetics, vaccination
protocols, delivery points, we provide them with opportunities
to----
Mr. Costa. It is value-added, value-added that ultimately--
--
Mr. Smith. Correct.
Mr. Costa.--passes to the consumer.
Mr. Smith. Correct. But if that rule would have gone into
place, we would had to have shut that program down because I
would have had to have justified to every person that I
purchased cattle from why we were providing premiums that we
were, and so that and the other provision that within that
proposed GIPSA rule related to packer ownership of cattle. As
you are aware, Congressman, our feedlot and beef processing
facility, they are integrated. They are functionality
integrated. Without one, the other cannot operate, and for a
rule to be written which says that a packer cannot own
livestock would basically destroy our business model.
Mr. Costa. Well, and not only yours but other, throughout
the country.
Mr. Smith. Correct.
Mr. Costa. Which is one of the reasons that I have had--and
I would go further to say that the Congress is, in three
successive budget appropriations opined its view on this and to
still have the United States Department of Agriculture pursuing
rulemaking in spite of that fact, is really a violation of
separation of powers, but I mean, I am not a constitutional
lawyer.
My time has expired, but I would like to ask Mr. Roenigk,
if we have a second round, about his view on the GIPSA impact
as well.
Mr. Roenigk. Yes. Thank you. The two issues, one, USDA is
not following the instructions, directions of Congress, so I
think that is a broader issue that we all need to be aware of,
and then second, the overreaching into business relationships.
We have had family farmers under contract growing for 40 or
more years, and that relationship is very stable, and it has
been dealt with under the previous rules, so it is a case of
regulating a problem that doesn't exist.
Mr. Costa. Thank you.
The Chairman. The gentleman yields.
The chair recognizes the gentleman from Pennsylvania, Mr.
Thompson, for 5 minutes.
Mr. Thompson. Thank you, Chairman.
I want to pick up where the Ranking Member left off and
check in with Mr. Miller and see, specifically as the Ranking
Member kind of laid out, the intent of Congress has been
repetitive and clear, yet despite that, this issue persists.
Mr. Miller, could you take a moment to explain why much of
the livestock sector still believes this final rule is bad for
your business and bad for producers?
Mr. Miller. Congressman, I am sorry, are you referring to
GIPSA or----
Mr. Thompson. Yes, sir.
Mr. Miller. GIPSA. Okay. Yes. The GIPSA rule really leads
to increased litigation costs, but the biggest thing I think it
does, it decreases innovation that is out there. I mean,
ultimately, in today's beef and pork business, we spent 25 to
30 years trying to get out of this commodity bucket and trying
to tailor different products, to different programs, to
different consumers, and ultimately every pound of beef or
every pound of pork isn't necessarily equivalent to every pound
of beef and every pound of pork, if that makes sense. So,
ultimately the offerings are becoming larger and larger, and
the GIPSA rule, as originally proposed, would greatly increase
litigation cost without adding any additional benefit to the
farmers, ultimately to our customers and consumers either.
Mr. Thompson. Thank you.
Now, Mr. Smith, we heard a lot from my cattlemen most
recently about potential impact with opening up trade from
Brazil with beef and the potential, which as a country has
dealt with, had some issues in certain areas, I think it was
with foot and mouth, and what that potentially would do perhaps
to negatively impact our beef industry, so I was just curious
to get your perspectives.
Are there safeguards that would make fresh and frozen beef
imports from Brazil viable and safe for U.S. cattle sector, and
is the problem with this rulemaking primarily one of flawed
process or simply insufficient scientific data that offered
judgment in the matter?
Mr. Smith. Congressman, to the first part of your question,
I am not a trained microbiologist, so I don't know if I could
effectively and correctly answer the question relative to is
there something we could do to negate if--to minimize any
potential impact to product coming in on fresh product. I would
have to get back to you and visit with some of the scientists I
am familiar with.
Regarding the second portion of your question, our biggest
concern as an industry is one of making certain that due
diligence has in fact occurred. I think we would take the
position that we have to be overly cautious. Using a term that
USDA likes to use quite often, in the abundance of caution, we
might suggest that we either slow down this process or just
make certain that what we are proposing to do, i.e., allowing
fresh product from Brazil to come into the country, that we
have in fact dotted `I's and crossed `T's.
Mr. Thompson. Thank you.
Mr. Roenigk, in your testimony, you outlined a number of
challenges to our producers facing the global market, and in
two regions, and specifically with the Trans-Pacific
Partnership and the Transatlantic Trade and Investment
Partnership, we have opportunities to address several of these
issues. Do you believe that the current path of these
negotiations will yield satisfactory outcomes, and on which key
issues do you believe the U.S. should be pressing harder?
Mr. Roenigk. You have asked an excellent question. In the
case of Trans-Pacific Partnership, Canada has a supply
management program for poultry and dairy. Our position is that
Canada can maintain that supply management system if they
prefer. We would just ask that the border be open to--for free
and fair trade for U.S. poultry, and we hope that negotiation
does that.
In the case of the agreement being discussed with the
European Union, we have been shut out of that market since
1997, originally because the issue was we used chlorinated
water in our processing. We have indicated that we would be
glad to use something other than chlorinated water, which we do
in the case of Russia. That has not been sufficient for the EU
to revisit that issue. We think that is a $600 million market.
They import over $2 billion of poultry a year. We think we
could get at least \1/3\ of that market. And to be shut out of
the European market because of really a non-tariff trade
barrier is really unfortunate, and if the negotiations do not
resolve that, I am not sure when the next good opportunity will
be to address that, so we are hopeful.
I would like to predict that we will be successful, but as
they say, nothing is agreed to until everything is agreed to,
so we are staying in close contact with our negotiators.
Mr. Thompson. Okay. Thank you, sir.
And thank you to all the panel.
Mr. Chairman.
The Chairman. The gentleman yields.
The chair now recognizes the gentleman from Georgia, Mr.
Scott, for 5 minutes.
Mr. Scott. Yes. I would like to sort of continue the line
of questioning on trade and zero in on the Trans-Pacific
Partnership, and especially as it affects market access and
particularly with Japan. I am very much concerned about what
impact this would have particularly on beef and pork, I guess
most of you, but especially there.
So, Mr. Michael Smith and Mr. Shane Miller, would you share
with the Committee exactly what the impact would be on your
industry if an agreement is made and Japan is exempted and does
not remove their tariff and non-tariff trade barriers in this
agreement?
Mr. Smith. I will ask my counterpart here to comment as
well, but I will tell you my personal opinion is, if Japan says
that they will not negotiate in terms of relaxing the tariffs
that are currently being applied to beef, that we would
encourage you not to vote for TPP.
Mr. Scott. What would happen if we did? I am not saying we
will, but it would help us not to do that if you would tell us
the grave impact it would have on your industry if that
agreement was approved and giving, without Japan committing to
access, what impact would it have on the other 12 or 11
nations?
Would it be a bad precedent? What would be the cost to you
and your industry? What would be the impact to the people of
America, the cost? Can you give us something that we can hold
our hat on to go to bat for you that would tell us how bad an
impact this would be on American beef and pork especially?
Mr. Smith. Mr. Miller, because he included pork in the
question, Congressman, I would ask my counterpart here to----
Mr. Scott. All right.
Mr. Smith. So I can come back and address it for my company
as well.
Mr. Scott. Okay.
Mr. Miller. Congressman, from a Tyson perspective,
ultimately we do share the goal of getting to zero on tariffs
and appreciate the support of the Administration and Congress
on the issue. However, we do need to achieve significant market
access for our products as part of the TPP negotiations, but we
also need to ensure that we stay on a level playing field with
our global competitors.
Having some access, meaning from a Japanese perspective, is
the largest pork revenue destination for U.S. exports in the
world. Mexico is number one from a volume perspective, but
Japan is number one from a total dollars standpoint, so
accessibility is definitely key from a pork perspective and
also from a beef perspective from Tyson's point of view.
Mr. Scott. All right.
Mr. Smith. And Congressman, I don't want to sound like a
parrot, but I would echo a lot of those comments. The Japanese
market is very important to the U.S. beef industry. Harris
Ranch is fortunate to be one of the first companies or the
first company to get back in their country once they allowed us
with their 20 month rule. There is tremendous upside potential
to be able to increase the volume of product being moved into
Japan, and especially if those tariffs were removed.
Mr. Scott. Okay. Very good.
And I certainly agree with you and certainly will help you,
and, because I believe it will have a devastating impact. It
will set a bad precedent, and I hope that we in Congress will
not approve that trade agreement unless Japan acquiesces and
give us that market access, but let me go to one other point I
raised earlier about the renewable fuels because Congressman
King and I working together will have a solution for this.
If you were here earlier, I told him in a--he asked and I
said if I were a farmer in Iowa, indeed, I would be planting
corn, corn, corn, with the way it is going, but at that
Renewable Fuel Standard is having a devastating impact on you
and on your feed cost. My issue here is that why not put a
great more emphasis on other areas of carbohydrates? I mean,
why--corn is there, you are not going to change that. I think
the die is set, the economics are set there, but as I said
earlier, there is just so much corn we can do, and now 40
percent of all the corn we produce is used for ethanol, and if
you get the renewable standard going with more and more
automobiles, more and more, then you just would get more. I
think that we should be putting--there are other ways to make
the ethanol.
There is switchgrass to make it. There are ways in which,
now, of course, with sugarcane. Perhaps a part of your plea may
be in adjusting this because the issue with you is bringing
down the impact of feed costs, that the FNL is putting the
downward pressure on, and so I think that there is other areas.
I know in the south at the University of Georgia, for
instance, great progress is being made in other areas of
carbohydrates, and perhaps we might do well to take a look at
Brazil and maybe suggest to Congress that we lift those tariffs
on the import of sugarcane, at least to a way that the sugar
industry here can accept and begin to look to other means of
being able to add to the supply of ethanol because ethanol is
in the future. It is going to be more.
Renewable fuels is where we are going. The Earth is going
to run out of petroleum and fossil fuels, so I just wanted to
make that comment and look at it more holistically. There are
wood chips that can make ethanol, pine straw now. All we need
to do is put our efforts to that, and I would encourage you--we
will work with you on the renewable fuels, but I would also
encourage you to work with helping us in Congress to lift the
downward pressure off of all of this ethanol that is being made
on corn and shift to other areas.
Yes. The gentleman, did you want to respond, Dr. Hill?
The Chairman. Do you want a quick response?
Mr. Scott. Yes, sir, please.
Dr. Hill. I live near Ames, Iowa. The town just to the east
is Nevada, Iowa, and right now there is a major construction
project to build a cellulosic ethanol plant. It is being
financed entirely by DuPont. My son, who farms, has been
working with DuPont for the last 3 years in working on the
proper collection of corn stover. This is going to be--that is
what is going to feed this plant, so there is activity other
than corn based ethanol, going forward.
Logistics of the amount of corn stover versus a grain, corn
is phenomenal, but at least we do have private industry putting
money into this, and you are right, there are other sources.
Mr. Costa. Thank you, sir.
Thank you, Mr. Chairman. I appreciate the time.
Mr. Johnson. Mr. Chairman.
Dr. Hill. Thank you, Mr. Scott. Sorry.
Mr. Johnson. Could I make a comment on the RFS as well? I
think what tends to get lost in this conversation is the RFS,
when it was originally conceived, contemplated using corn for
the first half of the development of the renewable fuel
industry, and really the next big chunk was going to come from
these advanced biofuels like stover, like wood chips, like
manure, like all those kinds of things.
We have largely gotten the first half done. Corn got us
there, and what we learned in this industry by producing
renewable fuel from corn is enormously important to developing
that next step. If we back up from this thing now, we will
destroy the opportunity to do the next step, and that will be a
terrible shame.
Mr. Costa. Well stated. I agree with you 100 percent.
Mr. Cook. Mr. Chairman, may I also make a comment about
RFS.
The Chairman. Yes.
Mr. Cook. I would like to briefly illustrate what it has
done to our company individually. I was at a farmer cooperative
meeting in Minneapolis, and a gentleman who was a ethanol plant
developer stood up and he was asked a question, what the impact
was on the livestock industry because of the ethanol. And he
made the comment there was no impact on the livestock industry,
and that is absolutely not true.
I report in my testimony that our feed cost had gone up 125
percent from 2006 to 2013. Individually, our company, we are on
the lower end of that at 80 percent, and you can argue, well,
why is that? Your cost gone up or do you use your feed
inefficiently, did you buy it wrong, you can argue all of those
things.
We have reduced the--or improved the efficiency of our feed
by millions of dollars since then, and we are--we average
better that our industry peers in the use and the feed
conversion of our turkeys. And the other side of that is, we
are compared to 339 feed mills in the United States. We buy, we
are ranked number 37. So, I would argue that we buy and use the
corn we have to purchase as competitively as anyone, but our
costs have gone up 80 percent, and we don't have the
opportunity, in the turkey business, it is a zero sum game.
There are other things we can feed our turkeys like wheat,
but there are only so many acres, and so I would urge you
strongly a complete repeal of the only--if the market is
established for ethanol, just let it work. Let the free market
work, and if they want to buy corn to put in ethanol, then they
should have to pay and not be mandated that that portion of the
market go to corn. Just those that want, need corn, we become
more efficient through competitiveness but not a mandate saying
you get this much.
Mr. Costa. Thank you.
The Chairman. Thank you.
Ranking Member Costa, any closing remarks?
Mr. Costa. No. I thought it was a good hearing, Mr.
Chairman.
The Chairman. Thank you.
I want to thank the witnesses. Great insight. We feel like
this will help us address those issues that you have laid out
in front of us, and we will keep your comments, and--do we keep
the record open, do we keep this open for a period of 10 days
for additional remarks, extension of your remarks.
So thank each one of you for being here, and with that, we
adjourn.
[Whereupon, at 12:48 p.m., the Subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Submitted Fact Sheet by Hon. Reid J. Ribble, a Representative in
Congress from Wisconsin
Supplementary Material Submitted by Joseph Glauber, Ph.D., Chief
Economist, U.S. Department of Agriculture
Insert 1
Mr. King. And that is this: A bushel of corn breaks down at
about three different parts, starch and protein and
CO2. And CO2 is a byproduct of ethanol
production, but it is also a byproduct of feed consumption. So
I would submit that it is more accurate to say about \1/2\ of
it comes back, because \1/3\ of the product goes off into the
air and CO2 whether you feed it or whether you
convert it into ethanol. And I wanted to--I wanted to submit
that into the record for discussion and actually ask your
response to that.
Dr. Glauber. I would have to look at the--typically, just on
a matter basis, been focusing--we focus--tend to focus on about
\1/3\ in terms of the volume of that comes back.
Mr. King. I would ask you, if you could, come back to me and
perhaps the panel with a response to that.
Dr. Glauber. Sure.
While there are several ways to look at the ethanol production
process and outputs, I think we can agree that a simple weight
breakdown of output of dry-mill ethanol production can obscure the
value of the stream of products being produced. The simple rule of
thumb that \1/3\ of the weight of the corn being processed ends up as
ethanol, another \1/3\ as DDGS and another \1/3\ as CO2 is
roughly accurate from a weight standpoint, but as you point out, issue
of CO2 and other gasses released in livestock feeding as
well as CO2 produced in ethanol processing complicates such
a simple analysis.
Further, that \1/3\, or approximately 17 pounds per 56 pound bushel
of corn, which comes back as dried distillers grains, or DDGS, returns
to livestock rations not just to displace corn, but also to displace
higher valued products such as soybean meal in many non-ruminant
rations for swine and poultry. Some facilities also capture the
CO2 produced for sale into markets such as consumer beverage
production. Dry mill ethanol facilities continue to refine their
processes to capture value and corn oil is now commonly extracted from
the DDGS after ethanol production with many facilities extracting up to
1 pound of corn oil per bushel to be used in biodiesel production or
returned into reformulated livestock feeds in `fine-tuned' rations.
Other potential advancements might see the large scale conversion
of corn fiber in the pericarp converted to cellulosic ethanol, further
expanding the volume of ethanol produced per bushel. So while the
statement that \1/3\ of the weight of a bushel of corn returns as
livestock feed, there are other comparisons that can be made depending
on the focus of the discussion. In light of the livestock feed
discussion at the hearing and the direct weight displacement often made
in livestock rations, this was the comparison put forth.
Insert 2
Mr. King. . . .
And so I just quickly ask this question as I watch this clock
tick down. As I understood in your comments on COOL, I would
just make the comment that if the Administration would strongly
come out and support voluntary COOL or repeal of mandatory
COOL, we could get this done in the House and the Senate, and
would bypass a lot of this discussion, and would save billions
of dollars, and it would be a lot better deal to do with our
trade partners.
But I wanted to ask you the economic question, and that is,
on the egg issue, if California is successful in doubling the
size of cage sizes and infrastructure for the egg producers in
this country by regulating all of America from California by
state statute, what happens to that requirement for
infrastructure investment on the part of all egg producers in
America?
Dr. Glauber. Well, certainly the concern--I know at the time
the state regulations were being debated and going into force,
there was a lot of concern among the California egg producers
about what those costs would mean for them and the additional
costs on egg production. And so I frankly haven't looked at the
individual studies as closely, I would be happy to get back
with you on that, but any time you put in specific standards
like that, there are costs.
Now, weighing that against what the benefits are for consumer
is the other side of that, and, again, I don't have any good
numbers for you.
Mr. King. I would appreciate it if you would get back to me
on that, and I would just point out that doubling the
infrastructure size doubles the cost, and that is the report I
get back from them.
Under Proposition 2, California egg producers who employ the
conventional ``battery cage'' system must adopt a new production system
before January 1, 2015. Proposition 2 would prohibit confining egg-
laying hens on farm, for all or the majority of any day, in a manner
that prevents the hen from (a) lying down, standing up and fully
spreading both wings without touching the sides of the enclosure or
other egg-laying hens, and (b) turning around freely. Significantly,
the new housing requirements will apply to all eggs sold in California
including those produced in other states. Currently, California imports
about 12 million cases of eggs annually, about 25 percent of which in
liquid or dry form (Bell, 2013). Four states (Iowa, Minnesota, Missouri
and Ohio) account for 70 percent of the eggs imported by California.
Carman (2012) estimates that increasing the size of battery cages
to 116 square inches per hen would increase the costs of egg production
systems by 12.5 percent. That cost increase would likely result in a
2.5 percent decline in California egg production and a 12 percent
increase in retail prices for California consumers.
Bell, Don. ``California's Egg Requirements--2015.'' Egg Industry
Center. Iowa State University. Available at http://www.ans.iastate.edu/
EIC/newsletters/CA_Effect_Oct_Special_Report.pdf.
Carman, Hoy. ``Economic Aspects of Alternative California Egg
Production Systems''. August 30, 2012. Available at http://
www.cdfa.ca.gov/ahfss/pdfs/regulations/Dr_Hoy_Carman.pdf.
Insert 3
Mr. Neugebauer. Yes. So I want to go back to the COOL issue.
You know, you don't see the benefit. We have our trading
partners, our largest trading partners now threatening to
impose tariffs on our country. I think one of the things the
livestock producers in my area are going through was, you
mentioned a while ago when you were talking about Lubbock,
Texas; I am from Lubbock, Texas. And, I remember going through
a horrible drought. The herds are way down, and the feedlot
numbers are shrinking and it is going to take a long time to be
able to build these numbers back up when it rains again.
I think that the producers in my area are feeling very
vulnerable in the sense that they have this COOL issue cloud
hanging over them; they have the drought; and now they are
concerned about this Brazilian beef and the potential to bring
hoof-and-mouth disease to this country.
The question I have is, when you did the analysis for Brazil,
now, I understand you used the qualitative method, but when the
analysis was done, for example, in 2002 for Uruguay, they used
the quantitative analysis. Some people speculate that the
qualitative analysis is fairly subjective and that the
quantitative analysis is a more thorough. As an important issue
as this is, why would we have used a different analysis than we
have used previously?
Dr. Glauber. Congressman, you raise a good question. I can't
answer it. The FSIS [clarified later to say APHIS] did that
analysis. I would be happy to get back to you with a more
complete answer on that.
APHIS bases its import decisions on sound scientific risk
assessments and allows imports only when sufficient protective
safeguards are in place. Most of APHIS' risk assessments have been, and
continue to be, qualitative in nature. APHIS believes that quantitative
risk assessment models are useful in cases, such as the 2002 risk
analysis for fresh beef from Uruguay, where risk management questions
cannot be addressed with a qualitative assessment. APHIS believes that,
when coupled with site visit evaluations, qualitative risk assessments
provide the necessary information to assess the risk of introducing
animal diseases like Foot and Mouth Disease (FMD) through importation
of commodities such as fresh beef. Furthermore, the OIE (World
Organization for Animal Health) states that, particularly for diseases
listed in the Terrestrial Animal Health Code (such as FMD), where there
are international standards and broad agreement concerning likely
risks, a qualitative assessment may be all that is required (OIE. 2014.
Chapter 2.1. Terrestrial Animal Health Code).
______
Supplementary Material Submitted by Michael T. Smith, Special Projects
Manager, Harris Ranch; on Behalf of National Cattlemen's Beef
Association
Mr. Costa. Thank you very much, Mr. Chairman. I want to go to
Mr. Smith.
Mr. Smith, you, I thought, did a good job of highlighting the
impacts of the drought, especially the regulatory impacts of
the drought to California and the production of agriculture
products that the fruits and vegetables that we do so good, not
only to Harris Ranch but to agricultural producers throughout
California.
I want to go back to MCOOL. At Harris Ranch, what do you
believe you are going to have to do in order to comply with the
MCOOL rule based upon obviously what happens with the WTO
ruling here later this year?
Mr. Smith. Well, Congressman Costa, we are currently in
compliance with the rule and even the revised rule. It has
actually added some additional negative impacts on our company
in terms of the additional----
Mr. Costa. How much on costs? Have you done an estimate on
the cost?
Mr. Smith. No, sir, not direct estimate on the cost of the
company, but it is--and you know what, Congressman, I will--we
will actually run those numbers and get them back to you, but--
I can have that number.
Mr. Costa. If you could provide them for the Subcommittee, I
think it would be helpful.
Mr. Smith. Yes, sir.
During our last fiscal year, Harris Ranch Beef Company lost
approximately $2.4 million due to our implementation of mandatory COOL.
______
Submitted Letter by Clint Krebs, President, American Sheep Industry
Association
March 17, 2014
Hon. Harold Rogers,
Chairman,
House Committee on Appropriations,
Washington, D.C.;
Hon. Nita M. Lowey,
Ranking Minority Member,
House Committee on Appropriations,
Washington, D.C.
Dear Chairman Rogers and Ranking Member Lowey:
The 169 undersigned organizations represent a broad range of food
producers, wildlife organizations, sportsmen, local governments and
resource interests that benefit from the cooperative efforts of the
USDA-APHIS/Wildlife Services (WS) program. We write in strong support
of sufficient funding for this critical program and in opposition to
any effort to restrict or eliminate WS funding.
Wildlife causes more than $12.8 billion in damage each year to
natural resources, public infrastructures, private property and
agriculture. WS works to prevent, minimize or manage this damage and to
protect human health and safety from conflicts with wildlife. Wildlife
damage to U.S. livestock, aquaculture, small grains, fruits, vegetables
and other agricultural products has been estimated to reach nearly $1
billion annually. Wildlife predators cause more than $126 million in
death loss to livestock; field crop losses due to wildlife total $619
million annually; losses to vegetables, fruits and nuts total $146
million annually; and 70 percent of catfish farmers incur wildlife-
related damage resulting in losses of $10 million to $13 million
annually from double-crested cormorants in Mississippi alone. As a
result, WS is an essential program in agriculture production in the
United States.
The spread of wildlife-borne diseases to humans, livestock and
other wildlife is a growing concern. WS monitors and manages pests and
diseases in the United States. WS is often the first line of defense in
reducing and eliminating diseases such as the West Nile virus, avian
influenza, pandemic H1N1, chronic wasting disease, pseudo rabies,
bubonic plague, Hantavirus, lyme disease, bovine tuberculosis and
rabies. In fact, rabies-associated costs range from $300 million to
$450 million annually in the United States primarily for pet
vaccinations, education, diagnostics, post-exposure treatment and case
investigations. WS also prevents entry and controls invasive species
such as feral swine, nutria, the brown tree snake, European starlings
and the beaver. Feral swine are a subject of increasing concern as
potential carriers or catalysts for a variety of diseases. It is
estimated that there are more than five million feral swine in 38
states that cause an estimated $1.5 billion in damage annually with
more than $800 million of damage to agriculture resources.
In fiscal year (FY) 2012 alone, WS conducted 67,842 technical
assistance projects to reduce wildlife damage to property in urban,
suburban and rural locations as well as airports across the country,
which include homes, schools, industrial facilities, roads, bridges,
airport runways, dams and electrical and water systems. One example of
this work is WS efforts in reducing deer collisions with automobiles,
which injure an average of 29,000 people annually and cause more than
$1 billion in damage. In addition, WS works to protect wetlands
habitat, riparian habitat, tidal marsh and timber from a variety of
pest species including feral hogs, nutria and beavers, which alone
cause millions of dollars of damage each year--more than any other U.S.
wildlife species. WS expended more than $18.6 million to protect
property from wildlife damage in FY 2012, up from $16.1 million in
2008.
Protection of natural resources is a growing need for WS. Last
year, WS invested resources in conservation of game species including
mule deer, bighorn sheep, antelope and waterfowl in eight states. In FY
2012, WS spent $6.5 million for cooperative work with Federal and state
agencies to protect and assist 169 threatened or endangered species in
35 states, Puerto Rico, Guam and the U.S. Virgin Islands. In more than
95 percent of the projects, local threatened and endangered species
either increased or remained stable.
More than 130,000 wildlife strikes with civil aviation have been
reported since WS began keeping records in 1990. In FY 2012, there were
more than 10,700 wildlife collisions with civil aircraft reported, with
an additional 5,930 strikes reported by military aviation costing the
total aviation industry more than $700 million annually. WS provided
direct services at 354 airports in FY 2012 including population
management through harassment, habitat modification or removal.
Technical assistance, such as initial consultations and wildlife hazard
assessments, was provided at 772 airports across the country.
As the ``Miracle on the Hudson'' demonstrated in 2009, the
management of wildlife hazards on and near our nation's airports is a
critical safety priority. WS provides valuable support to the aviation
community in addressing these hazards. From its assistance in preparing
FAA-required wildlife hazard assessments to its help with managing
hazardous wildlife populations, WS staff ensure that U.S. airports both
meet the regulatory obligations under 14 CFR Part 139 and reduce the
safety risks associated with aircraft wildlife strikes. WS also assists
the FAA in monitoring national trends regarding wildlife populations
and the hazards they pose to aviation. At a time when airports are
facing significantly expanded wildlife hazard management requirements
through recently issued FAA Advisory Circulars and grant assurance
modifications, its role will be even more critical to the aviation
community, going forward.
It has been WS's cooperative nature that has allowed it to
accomplish all of the above listed programs and has made it the most
cost effective and efficient program in the Federal Government in the
areas of wildlife damage management and public health and safety. WS
has more than 2,000 cooperative agreements, up 20 percent from FY 2000,
and, in FY 2012, had 90,641 access agreements to professionally monitor
and manage wildlife on private, state and Federal lands.
WS cooperators include agriculture, forestry, private industry,
state wildlife agencies, state departments of health, state departments
of agriculture, schools, universities, counties, local governments,
Indian nations, homeowner associations, conservation groups and others
that, together with WS, mitigate the damage and dangers that public
wildlife can inflict.
Chairman Rogers and Ranking Member Lowey, we appreciate your
demonstrated leadership and strong support of this essential program.
Our organizations are committed to working with you to strengthen WS
resources and to ensure a continued Federal partnership in the
responsible management of our nation's wildlife.
Air Line Pilots Association, Int'l National Association of Federal
Veterinarians
Airlines for America National Association of State
Airports Council, International-- Departments of Agriculture
North America
American Association of Airport National Cattlemen's Beef
Executives Association
American Beekeeping Federation National Farmers Union
American Farm Bureau Federation National Milk Producers Federation
American Feed Industry Association National Pork Producers Council
American Horse Council National Renderers Association
American Sheep Industry Association National Rifle Association
American Society of Agricultural National Shooting Sports Foundation
and Biological Engineers National Sorghum Producers
American Veterinary Medical North American Meat Association
Association
Animal Health Institute Public Lands Council
Association of American Veterinary Rocky Mountain Elk Foundation
Medical Colleges
Association of Fish and Wildlife Safari Club International
Agencies Association of National Society for Range Management
Grasslands
Catfish Farmers of America Sportsmen for Fish and Wildlife
Catfish Institute State Agriculture and Rural Leaders
Association
Congressional Sportsmen's United States Animal Health
Foundation Association
Livestock Marketing Association U.S. Cattlemen's Association
Mule Deer Foundation USA Rice Federation
National Aquaculture Association Wild Sheep Foundation
National Association of Counties
Alabama Catfish Producers New Mexico Trappers Association
Alabama Farmers Federation New Mexico Wool Growers, Inc
Alabama Meat Goat and Sheep North Carolina Sheep Producers
Producers Association
Arizona Cattle Feeders Association North Dakota Lamb and Wool
Producers Association
Arizona Cattle Growers' Association North Dakota Stockmen's Association
Arizona Cattlemen's Association North Dakota Department of
Agriculture
Arizona Wool Producers Association North Dakota Game and Fish
Department
Arkansas Cattlemen's Association Northeast States Association for
Arkansas State Sheep Council Agricultural Stewardship
Association of Oregon Counties Ohio Cattlemen's Association
California Agricultural Oklahoma Cattlemen's Association
Commissioners and Sealers
California Cattlemen's Association Oregon Cattlemen's Association
California Farm Bureau Federation Oregon Dairy Farmers Association
California Wool Growers Association Oregon Department Agriculture
Colorado Cattlemen's Association Oregon Farm Bureau Federation
Colorado Wool Growers Association Oregon Forest Industries Council
Connecticut Sheep Breeders Oregon Outdoor Council
Association, Inc
Delaware Sheep and Wool Producers Oregon Seed Council
Association, Inc.
Delta Council Oregon Sheep Growers Association
Eastern Regional Conference of the Oregon Small Woodlands Association
Council of State Governments Oregonians for Food & Shelter
Empire Sheep Producers Pennsylvania Cattlemen's
Association
Florida Cattlemen's Association Pennsylvania Farm Bureau
Garden State Sheep Breeders Inc Pennsylvania Sheep and Wool Growers
Association
Georgia Cattlemen's Association South Carolina Sheep Industries
Association
Georgia Sheep and Wool Growers South Dakota Cattlemen's
Association Association
Hawaii Sheep and Goat Association South Dakota Sheep Growers
Association
Idaho Cattle Association South East Dairy Farmers
Association
Idaho Farm Bureau Sportsmen for Fish and Wildlife
Idaho
Idaho Wool Growers Association Tennessee Cattlemen's Association
Illinois Lamb and Wool Producers Tennessee Sheep Producers
Inc. Association
Independent Cattlemen's Association Texas and Southwestern Cattle
of Texas Raisers Association
Indiana Sheep Association Texas Cattle Feeders Association
Iowa Cattlemen's Association Texas Farm Bureau
Iowa Sheep Industry Association Texas Pork Producers Association
Kansas Livestock Association Texas Sheep and Goat Predator
Management Board
Kansas Sheep Association Texas Sheep and Goat Raisers'
Association
Kentucky Cattlemen's Association Texas Wildlife Damage Management
Association
Kentucky Sheep and Wool Producers United Dairymen of Arizona
Association
Louisiana Cattlemen's Association U.S. Cattlemen's Association
Maine Sheep Breeders Association Utah Cattlemen's Association
Maryland Sheep Breeders Association Utah Department of Agriculture and
Food
Massachusetts Federation of Sheep Utah Farm Bureau Federation
Associations
Meat Sheep Alliance of Florida, Inc Utah Wool Growers Association
Michigan Sheep Breeders Association Vermont Sheep and Goat Association
Midwestern Legislative Conference Virginia Farm Bureau
of the Council of State Virginia Cattlemen's Association
Governments
Minnesota Lamb and Wool Producer Virginia Sheep Producers
Association Association
Minnesota State Cattlemen's Wasco County Livestock Association
Association
Missouri Cattlemen's Association Washington Cattlemen's Association
Missouri Sheep Producers Washington Cattle Feeders
Association
Montana Association of State Washington Forest Protection
Grazing Districts Association
Montana Farm Bureau Federation Washington State Sheep Producers
Montana Public Lands Council West Virginia Cattlemen's
Association
Montana Stockgrowers Association West Virginia Shepherds Federation
Montana Wool Growers Association Western United Dairymen
Nebraska Cattlemen, Inc. Wisconsin Sheep Breeders
Cooperative
Nebraska Sheep and Goat Producers Wyoming Animal Damage Management
Board
Nevada Cattlemen's Association Wyoming Farm Bureau Federation
Nevada Wool Growers Association Wyoming Game and Fish Department
New Hampshire Sheep and Wool Wyoming Sportsmen for Fish &
Growers Association Wildlife
New Mexico Cattle Growers' Wyoming Stock Growers Association
Association
New Mexico Department of Wyoming Wild Sheep Foundation
Agriculture
New Mexico Farm & Livestock Bureau Wyoming Wool Growers Association
New Mexico Federal Lands Council
______
Submitted Questions
Response from Joseph Glauber, Ph.D., Chief Economist, U.S. Department
of Agriculture
Questions Submitted by Hon. Frank D. Lucas, a Representative in
Congress from Oklahoma
Question 1. As has been stated several times in the prepared
testimony for this hearing, the cattle herd is at its smallest size
since 1951. Has the nature of this drawdown been more a matter of a
reduction in size of individual herds, or a matter of cow/calf
operators exiting the business altogether? What are the short and long-
term implications of this situation for the beef packing sector?
Answer. The national herd has shrunk due to a combination of both
factors. The number of farms with cattle and calves fell 5.2% from 2007
to 2012 to a total of 913,246 farms and at the same time the cattle and
calves inventory fell by 66% to 89.9 million head over the same period.
The very smallest and largest farms showed either modest declines or
even growth, while the bulk of the operations, those between 50 and 500
head, saw their numbers and inventory decline.
The short run implication for the packing sector will be increased
competition for the cattle that are available as they seek to keep
existing capacity operating, supporting live animal prices and
encouraging producer expansion. The longer run situation for the
packers depends on the extent of that expansion in the future. Cattle
producers may respond to current high prices, expand output and offer
supplies to keep existing slaughter capacity in operation or if
supplies are insufficient, it may result in an adjustment in slaughter
capacity which more closely reflects cattle availability. Packers in
the short run may reduce slaughter schedules which could be reversed if
supplies increase but extended periods of excess capacity could result
in a more lasting reduction in capacity through the closure of
slaughter facilities.
Question 2. The price of lean ground beef has taken a double hit
over the last couple of years. First, the quality of lean finely
textured beef was called into question, which led to a safe product
being largely excluded from the ground beef supply. And now, consumers
are looking at a low supply of beef and, consequently, high beef prices
overall. Can you please comment on the impact of reintroducing products
like lean finely textured beef on the price and availability of lean
ground beef?
Answer. Lean finely textured beef remains in the market place and
available although demand has fallen substantially and several
operations which process the product have closed. The trimmings used to
produce lean finely textured beef product have been diverted to other,
lower value uses, reducing the value of the live animal to the packer.
Prices of 50 percent lean (50CL) trimmings dropped sharply as
demand for fat trimmings as an ingredient in blending for hamburger
dropped; conversely, prices for 90 percent lean (90CL) trimmings jumped
as processors looked for alternatives for LFTB. 50CL prices have
recovered as demand for processing beef has remained strong.
While this has contributed to the increase in ground beef prices by
reducing supplies, the larger issue of reduced cattle numbers and
strong consumer demand through preference changes are more significant
contributors to the increase in ground beef prices. Increased consumer
acceptance of the product could expand supplies of ground beef which
would have a modest impact on prices. However, it remains uncertain if
consumers would be willing to accept the product in ground beef
purchases. Media stories indicate that the market for LFTB remains
fairly weak.
Weekly Wholesale Fresh Lean Beef Prices
Question 3. The high price of beef and pork has become a fairly
common topic of conversation. The cattle herd will take a long time to
rebuild, even if conditions improve immediately. What role does cattle
production in Canada and Mexico play in ensuring consumers in the
United States have access to beef when they do their shopping?
Answer. The United States imports live beef animals from both
Canada and Mexico. Mexico primarily supplies feeder cattle while Canada
provides both slaughter and feeder cattle to the U.S. market. At the
same time, the United States imports some table cuts of beef but
primarily processing grade beef from abroad.
Animal and meat trade has become increasingly important for both
U.S. consumers and producers. Live animal trade of both cattle and hogs
from Canada including feeder pigs, has helped increase supplies, as
have imports of processing grade beef. At the same time, U.S. meat
exports have grown and remain strong despite current high prices. Trade
in animals and meat products allows U.S. consumers to benefit from a
larger pool of supplies as well as allow processors to sell specific
cuts into markets where they are most valued meeting consumer demand at
home and abroad. A broader market helps to reduce price swings in times
of local market disruptions.
Question 4. Estimates show that per capita beef consumption is
expected to drop more than 2.5 pounds in the coming year and trends are
similar for the other major meat sources. How strong is the correlation
between this drop in consumption and the rising cost of meat? Do you
expect the industry work to curb these statistics, or will higher
profit margins nullify the incentive to increase consumption levels?
Answer. In the short run, demand for meat in the United States is
fairly inelastic, meaning U.S. consumers tend to be slow to respond to
increases in meat prices, but will adjust over a longer period of time
as well as make changes to types of meats they purchase. Beef demand
has thus far remained surprisingly resilient, but continued high prices
may eventually weigh on demand or cause a shift to lower priced beef
cuts or reduced cut sizes. Processors have also turned to export
markets where they have had some success in marketing fed beef product.
High feeder calf prices will eventually prompt herd expansion by
cow-calf operators if profitability is sustained which will improve
cattle availability at the feedlot and processor levels. Competition at
each level of the industry will provide the necessary incentive to
expand, however, the significant biological lags in bringing cattle to
market and past economic performance in the cattle sector may make for
a somewhat slower turn in cattle numbers. In the meantime, some parts
of the sector will enjoy strong profits.
I expect the industry is concerned about driving away demand at the
consumer level with current high prices, demand that may be difficult
to win back in the future when cattle numbers increase. In addition,
the industry is likely concerned with maintaining the necessary
infrastructure in feedlots and processing facilities for an expanded
herd.
Other meat prices have risen along with beef in part due to
consumer shifts to other lower priced meats.
Question 5. Part of the U.S. Department of Agriculture's response
to Porcine Epidemic Diarrhea Virus (PEDv) has been to deem it a
reportable disease. Producers will be required to report instances of
the disease associated with premises identification numbers (PIN).
Please list what additional information will be required with each
report, what information is generally associated with premise
identification numbers, and what steps USDA is taking to ensure that
this information is protected.
Answer. Reporting on PEDv and other swine enteric coronavirus
diseases (SECD) began on June 5. If a herd is known to be affected with
an SECD by a positive laboratory test, producers, veterinarians and
laboratory personnel must report it to USDA or State animal health
officials.
The report must contain the following:
A premises identification number (PIN or alternate);
Date the sample was collected;
Type of unit being sampled (sow, nursery, finisher);
Test methods used to make the diagnosis; and
Diagnostic test results.
The premises identification number is a six-digit figure that
points to a street address, including city, state, and ZIP Code, for a
location.
USDA will use all available authorities to protect information it
collects, and we will protect producer privacy to the fullest extent of
the law.
Question 6. The packing sector has identified the May 24, 2013
Country-of-Origin Labeling rule-an attempt to bring the United States
into compliance with its WTO obligations-as particularly onerous with
respect to an efficient processing system benefitting producers,
retailers, and consumers. If the WTO formally establishes that this
rule has not brought the United States into compliance, will the
Administration withdraw the rule until the issues surrounding Country-
of-Origin Labeling have been resolved?
Answer. The U.S. Department of Agriculture (USDA) implemented
regulations as directed by the COOL statute, which Canada and Mexico
successfully challenged through the WTO dispute settlement process. On
May 24, 2013, USDA amended those regulations to bring the United States
into compliance with its WTO obligations. Canada and Mexico brought WTO
compliance proceedings against the United States arguing that the May
24, 2013, regulation did not bring the United States into compliance.
We expect a report of the panel to be circulated to WTO Members and
made public later in 2014. Should the WTO ultimately find that the
United States has not complied in this dispute, the Administration will
certainly work with Congress, and interested stakeholders.
Questions Submitted by Hon. Collin C. Peterson, a Representative in
Congress from Minnesota
Question 1. Is there a way to quantify which industry may have been
impacted the most with the increase in corn prices? One of the
witnesses on the next panel indicated that they believe that the
livestock and poultry industry is the most impacted. Can you relate
what you saw since 2009 in the various end-user markets for corn?
Answer. Feed costs are a large part of livestock and poultry
operations. For example, roughly 81 percent of dairy production costs
are feed costs; 62 percent of operating costs for a hog farm are feed
costs; and about 70 percent of a cow-calf operation are feed costs.
Those are up since 2007 due to the increase in prices for corn and
soybeans.
Feed as a % of Total Operating Cost
By comparison, the farm share (including corn and soybeans) of the
food dollar spent by consumers is currently about 17 percent. For some
consumer items the farm share is higher or lower. For example, the farm
share of cereal and bakery products peaked at about 25 percent in 1974
and is now only seven percent. Similarly, the farm share of fats and
oils peaked in 1974 at 47 percent, but has fallen since, and now is
only 20 percent of the food dollar spent by consumers.
These shares and the associated elasticity in these markets, the
willingness of buyers to accept increases in price, and the price of
competing offerings all impact market response. In the case of corn,
the margins in production, be it beef or ethanol, will ration the
supply of corn. If the processor is unable to pass on the increased
corn cost, margins will narrow, and producers of beef or ethanol will
respond by reducing output.
In the short run, livestock producers may have limited ability to
reduce grain purchases as they feed existing animals on hand despite
margin reductions.
Question 2. Dr. Glauber, as you are well aware, feed costs are of
critical concern to the livestock industry. Can you discuss the
volatility in the market and some of the reasons for those movements?
Among this group there has been significant focus on the corn market so
could you also discuss that market separately?
Answer. Corn ethanol production increased dramatically over the
past decade, from just over 2 billion gallons in 2002 to almost 14
billion gallons in 2011. Driven by a combination of favorable market
forces and government biofuel policies, including the RFS, the increase
has spurred corn production and corn use for ethanol and has been one
of the factors in the recent grain price boom and overall improvements
in farm balance sheets including record farm incomes over the past few
years.
Strong demand for agricultural commodities, combined with global
supply shortfalls, have reduced global stocks and increased price
volatility. We have seen three price spikes since 2006. Moreover,
driven in part by tight feed supplies and high feed costs, low
operating margins have characterized the livestock, dairy and poultry
industry over the past few years. Corn ethanol production has been a
factor; however, the rise in commodity prices over the past few years
has been due to a variety of factors, such as increasing global demand,
key production shortfalls due to droughts, as well as increasing energy
prices.
Looking forward, with corn use for ethanol slowing due to
constraints on domestic ethanol consumption (the so-called ``blend
wall'') and prospects for record corn and soybean harvests this fall,
it is anticipated that stock levels will rise and prices will moderate,
which should lead to stronger profits in the livestock and dairy
sectors. The outlook over the next 10 years calls for moderate
productivity growth and flat to declining real prices for commodities.
Question 3. You indicate that higher feed costs have had an impact
on the livestock sector. Can you lay out which factors you believe are
most responsible for those higher feed costs among the various factors
of weather impact on production, export demand and other domestic uses
such as ethanol, that have led to higher crop commodity prices?
Answer. As mentioned above, corn ethanol production increased
dramatically over the past decade. That increase has spurred corn
production and corn use for ethanol and has been one of the factors
contributing to higher feed grain prices. However, I also mention that
the rise in commodity prices (and consequently feed prices) over the
past few years has been due to other factors, such as increasing global
grain demand, key production shortfalls due to droughts, as well as
increasing energy prices.
In particular the 2012 drought pushed livestock feed prices to
historic highs. With the highest plantings since 1937 and expectations
of record yields due to early planting progress, expectations in May
2012 suggested a record crop of 14.8 billion bushels of corn. The
drought sharply reduced yields and harvested acreage. Final production
estimates were over 4 billion bushels less than what had been expected
in May.
Soybean prices rose in early 2012 due to poor crops harvested in
Brazil and Argentina in the winter and early spring. The drought pushed
soybean farm prices to record highs in the United States, where they
reached $16.30 per bushel in September 2012. Lower production and
higher prices saw estimated soybean crush for 2012/13 reduced to 1.6
billion bushels, down three percent from May 2012 projections.
Hay production in 2012 was estimated at 120 million tons, down 8.6
percent from 2011 levels and the lowest yield since 1976. Yields were
down across the country except in the South where moisture was more
readily available when compared to 2011. Hay stocks as of December 1,
2012, were at their lowest level since 1957.
Those increases were particularly difficult on producers in the
Southern Plains due to the persistent drought in that region since
2011, which have degraded pasture conditions and left cattle producers
in those areas reliant on purchased livestock feeds. Since the start of
2011, the cattle and calves inventory has declined by almost five
million head, with almost 65 percent of those losses occurring in the
drought-affected states of Texas and Oklahoma.
The increase of feed prices due to the 2012 drought significantly
increased livestock feed costs. That increase in feed costs can be seen
in the expenditures on purchased feed expenses in 2012 and 2013 (about
$60 billion per year), which were about 20 percent higher than the 2011
and 2014 average (about $48 billion). Data available from USDA (2014).
Question 4. There is obviously concern in the livestock and poultry
sectors about the impact of renewable fuels; can you talk about the
interaction with dried distillers grains from ethanol production and
the livestock/poultry sector as well as the interaction between soybean
meal and oil prices and biodiesel?
Answer. Dried distillers grains with soluables (or DDGS) is a co-
product in the production of ethanol in a dry-mill facility and a high
value animal feed that has seen rapid expansion in use and export as
ethanol production has expanded. Dry-mill facilities represent roughly
80-90% of ethanol productive capacity and have been the primary source
of growth in the sector over the last decade. For every bushel of corn
processed in one of these facilities, roughly \1/3\ of the weight is
output as DDGS. So while a significant volume of corn is absorbed by
the ethanol industry, on the order of 5 billion bushels annually, a
significant share of that volume returns as a high value livestock
feed, mitigating upward pressure on feed prices.
However, the use and interactions in the feed market are more
complex than a simple volume calculation may suggest. After a series of
feeding trials and a period of adaptation, U.S. producers have
integrated DDGS into domestic livestock, poultry and dairy rations.
DDGS may be used to displace more than just corn in rations for some
livestock species. For example, a portion of the DDGS displaces higher
priced soybean meal in pork and poultry rations. Given their
substitutability, prices for corn and DDGS often follow a similar
pattern.
Soybean oil represents 50-65% of the vegetable oil and fats used to
produce biodiesel in recent years. Therefore expansion of biodiesel
increases the demand for soybean oil and increases its price. Soybean
crush produces both soybean oil and soybean meal, used in animal
rations. Greater demand for soybean oil increases the price crushers
are willing to pay for soybeans and has a slight suppressing effect on
soybean meal prices as supplies increase. However, the effect on
soybean meal prices may be limited by the availability of other
feedstocks such as palm oil or animal fats which don't produce a large
volume of feed co-product.
Question 5. How much impact does the price of fossil fuels such as
oil and natural gas, have on the livestock and poultry sectors?
Answer. Higher energy costs will affect a number of inputs directly
(e.g., higher oil and natural gas prices will make heating more
expensive) and indirectly (e.g., higher natural gas prices will
increase fertilizer and irrigation costs and will lead to higher feed
prices). While fuel and electricity costs are typically lower as a
percentage of total operating costs on livestock or poultry operations
compared to cropping operations, feed costs are a larger part of the
overall operating costs for livestock and poultry farms. In general an
increase in direct and indirect costs due to higher energy prices will
lead to a reduction in net farm income for livestock and poultry farms,
but by less than the percent increase in fuel prices. A higher price of
energy would affect beef cattle and dairy operations more than hog and
poultry operations. For more details see USDA-ERS (2011) ``Impacts of
Higher Energy Prices on Agriculture and Rural Economies,'' Economic
Research Report No. 123 (August; available online at http://
www.ers.usda.gov/publications/err-economic-research-report/
err123.aspx#.U9-YSqP1uVo).
Question 6. If the RFS was revoked today, what would be the impact
on demand for corn over the next 5 years? What do you estimate the
price of corn would be?
Answer. In 2008, my office was asked to examine the impact of
biofuels on food prices and in testimony before the Senate Energy
Committee I reported our findings that increased ethanol production
accounted for about 30 percent of the increase in corn prices over 2007
to 2008 accounting for the increased production needed to meet the rise
in ethanol production (Glauber, 2008). More recently, the increase in
U.S. ethanol production was estimated to account for about 36 percent
of the increase in corn prices over the period from 2006 to 2009 (see
Babcock and Fabiosa, 2011). They argue that high energy prices
accounted for the majority of the impetus behind expanded ethanol
production.
Last year I spoke to the House Committee on Energy and Commerce
about the RFS (Glauber, 2013). I noted that many analyses of the 2012
waiver petitions found the likely impact of a short-term waiver was
found to be small (see Babcock, 2012; and Irwin and Good, 2012; and
EPRINC 2012). At the time, researchers cited the need to stockpile
production credits as a compliance strategy for the blend wall, the
importance of ethanol as octane enhancer, and the current prices of
ethanol and gasoline, which favor blending ethanol.
However, the impact of a longer-term waiver, such as suggested by
your question, would likely depend on energy prices. So long as ethanol
is priced less than gasoline, it is unlikely that there will be much
reduction in ethanol usage from current levels. Most studies that
examined a longer term waiver on mandates forecasted a larger impact on
corn ethanol production than under a short-term waiver (see for
example, FAPRI, 2013). That is because ethanol is a much lower cost
gasoline volume extender and source of octane than refinery sourced
butane, reformante and alkylate.Therefore, most researchers have
concluded it is unlikely that at current prices ethanol production and
consumption would fall much lower than the amount of ethanol necessary
for E10, or about 13.4 billion gallons.
For example, CBO (2014) recently examined a full repeal of the RFS
in 2017 and found that ethanol consumption would likely be between 13
and 14 billion gallons. CBO notes that the long-term effects of a full
repeal could be greater, depending on oil prices and other factors. BO
also found under a full repeal of the RFS relative to full
implementation in 2017, corn prices could be about 25 lower per
bushel. They do not find much difference in corn prices comparing the
proposed RFS volumes (from the 2014 proposed rule) to a complete repeal
of the RFS. Those findings are consistent with a recent Iowa State
study (Babcock and Zhou, 2013) that find that the levels of usage in
EPA proposed rule for 2014 would result in corn prices that were about
24 lower than under the statutory levels of ethanol usage.
USDA forecasts that corn use for ethanol will remain relatively
constant over the next 5 years, settling between 5 and 5.1 billion
bushels, or between 13 and 14 billion gallons of ethanol production.
When the final rule for 2014 volumes is promulgated, it is unlikely
that a resulting level of ethanol consumption that is somewhere between
the proposed volumes and the statutory volumes would change USDA's
projection much for the short-run. Currently, we project farmgate corn
prices to fall between $3.35/bu to $3.75/bu over the next 5 years. Any
adjustment in our projected corn prices as a result of the 2014 final
rule would likely be minimal relative to any price effects we would
expect from normal year-to-year variability in weather. Similarly,
based on CBO and Iowa State research we would expect that a full repeal
of the RFS to have little effect on our baseline projections of corn
prices given the likelihood that ethanol consumption would remain in
the 13 to 14 billion gallon range.
Citations
Bruce Babcock and Wei Zhou (2013) ``Impact on Corn Prices from
Reduced Biofuel Mandates,'' CARD Policy Brief No. 13-WP 543, Iowa State
University (November: available at http://www.card.iastate.edu/
publications/synopsis.aspx?id=1215).
Bruce Babcock (2012) ``Updated Assessment of the Drought's Impacts
on Crop Prices and Biofuel Production,'' Card Policy Brief No. 12-PB8,
Iowa State University (August: available at http://
www.card.iastate.edu/publications/dbs/pdffiles/12pb8.pdf).
Bruce Babcock and Jacinto Fabiosa (2011) ``The Impact of Ethanol
and Ethanol Subsidies on Corn Prices: Revisiting History,'' Card Policy
Brief No. 11-PB5, Iowa State University (April 11: available at http://
www.card.iastate.edu/publications/dbs/pdffiles/11pb5.pdf)
Congressional Budget Office (2014) ``The Renewable Fuel Standard:
Issues for 2014 and Beyond,'' Report No. 4765, Washington, D.C. (June:
available at http://www.cbo.gov/sites/default/files/cbofiles/
attachments/45477-Biofuels2.pdf).
Energy Policy Research Foundation, Inc. (EPRINC 2012) ``Ethanol's
Lost Promise: An Assessment of the Economic Consequences of the
Renewable Fuels Mandate,'' white paper (September 14: available at
http://www.eprinc.org/pdf/EPRINC-ETHANOL-LOSTPROMISE-2012.pdf).
Food and Agricultural Policy Research Institute (FAPRI 2013)
``Renewable Fuel Standard Waiver Options for 2014 and Beyond,'' FAPRI-
MU Report No. 07-13, University of Missouri (December 30: available at
http://www.fapri.missouri.edu/outreach/
index.asp?current_page=outreach).
Joseph Glauber (2013) ``Statement of Joseph Glauber, Chief
Economist,'' testimony before the U.S. House Committee on Energy and
Commerce, Subcommittee on Energy and Power (June 26: available at
http://www.usda.gov/oce/newsroom/archives/testimony/2013files/
STATEMENT_OF_JOSEPH_GLAUBER_06-26-2013.pdf).
Joseph Glauber (2008) ``Statement of Joseph Glauber, Chief
Economist,'' testimony before the U.S. Senate Committee on Energy and
Natural Resources (June 12: available at http://www.energy.senate.gov/
public/index.cfm/files/serve?File_id=
7e3999a3-039c-5a46-eadb-44eb5a8b0c35).
Scott Irwin and Darrell Good (2012) ``Ethanol--Does the RFS
Matter?'' FarmDoc Daily August 2, University of Illinois (available at
http://www.farmdocdaily.illinois.edu/2012/08/
ethanoldoes_the_rfs_matter.html).
USDA-ERS (2014) ``Farm Income and Wealth Statistics,'' http://
www.ers.usda.gov/data-products/farm-income-and-wealth-statistics/
production-expenses-component-
details.aspx#Pc0dc2dfe270f462aa75e69f109f9c6fe_2_72iT0R0x12.
USDA-ERS (2011) ``Impacts of Higher Energy Prices on Agriculture
and Rural Economies,'' Economic Research Report No. 123 (August;
available online at http://www.ers.usda.gov/publications/err-economic-
research-report/err123.aspx#.U9-YSqP1uVo).