Cowboys, Lawmakers Discuss Market Reforms During House Ag Committee Hearing

Cattle markets need reform, “serious reform,” according to Senator Chuck Grassley (R-IA).

Consensus for what such reforms would entail, however, was missing at Thursday’s House Agriculture Committee hearing to “Review the State of the Livestock Industry.”

In the fourth hearing this year, Ag Committee chairman David Scott (D-GA) said witnesses provided “diverse perspectives,” and that many members of the committee are “motivated to craft policies that will support the well-being” of livestock producers.

“Two of the themes that were the focus of today’s hearing were the need to improve price discovery and how essential it is for us to look more closely at how we can incentivize competition and capacity in our processing sector,” Scott said. He added the committee wants to move towards a “reauthorization of Livestock Mandatory Reporting.”

Processing capacity, especially for the beef industry, was cited by most of the witnesses as a critical need. Agriculture Secretary Tom Vilsack noted USDA announced a $100 million loan guarantee program earlier this week to help smaller processors expand capacity. He said the department has also received 240 applications for a program to help small processors upgrade their facilities with grants of up to $200,000.

Vilsack also said USDA is reviewing more than 500 comments to determine how best to spend $500 million that will go to help expand meat and other food-processing capacity.

In his lead testimony, Senator Grassley touted the bill he and co-sponsor Sen. Jon Tester (D-MT) introduced last year as a reform the industry needs. That bill is often referred to as the 50/14 bill as it would mandate packers purchase a minimum of 50% of their weekly needs in the cash market, with delivery within 14 days.

“I believe that my bill would create the price transparency that's needed in the marketplace,” Grassley testified. “My colleague, Senator Deb Fischer (R-NE) has a bill that would help as well. Ultimately, Senator Fisher and I are working on a compromise that can unite the industry because kicking the can down the road is not an option.”

Further, Grassley told the committee, “I’m in front of you today to ask that you join me and other senators to include real reforms in mandatory price reporting.”

South Dakota rancher and NCBA vice president Todd Wilkinson, however, urged lawmakers to avoid one-size-fits-all policy prescriptions, and the importance of considering nuanced policies that properly address transparency, processing capacity, price discovery and oversight in the cattle markets.

“As producers struggle to get by, large meatpackers have realized record-breaking windfall profits. These profits have not been shared equitability with cattle producers,” Wilkinson said. “Because the challenges facing our industry are so diverse, it is imperative that policy makers at all levels of government remain focused on viable and tenable solutions with vast industry buy-in.”

Wilkinson said policy prescriptions may have disastrous unintended consequences. Instead, he urged a multi-pronged approach to bring relief to cattle producers, transparency to the markets and resiliency to the beef supply chain.

Fifth-generation Oklahoma rancher Scott Blubaugh, representing the Oklahoma Farmer’s Union, said Congress must pass a long-term reauthorization of mandatory price reporting “with reforms to improve price discovery.” He also encouraged federal and state governments to invest and support more competition in both marketing and processing.

“Over the last 50 years,” Blubaugh said, “our food system has come under control” of fewer and fewer multinational corporations.

“Vertical integration has created a dramatic imbalance of power between producers and corporations, allowing corporations to manipulate the marketplace, push down the prices paid to farmers and ranchers and ultimately drive us out of business,” Blubaugh testified.

The Oklahoma Angus rancher told lawmakers to put stronger language in rules, reinvigorating the Packers & Stockyards Act, provide reliable information to producers through mandatory price reporting and for consumers through accurate labeling.

François Léger, Owner and CEO of FPL Food, on behalf of the North American Meat Institute (Meat Institute) offered his perspective on the market as a beef packer and processor.

“The cattle and beef industry are driven by the supply and demand fundamentals of the free market, and the cattle industry is cyclical,” Léger said. “Not that long ago the cattle market was the reverse of today – in 2013, 2014 and 2015, the herd was small, and producers were making record profits while packers were losing money.

“During the pandemic, with packing capacity operationally reduced and the cattle herd large, cattle prices dropped. FPL worked with the Georgia Cattlemen’s Association to help support the cattle industry: we need cattle producers. And cattle producers need packers.”

Léger told the Committee that production in meat packing and processing plants is tied to the number of employees working the line, and the pandemic has only exacerbated labor shortages.

“Currently, we see on average 20 percent daily absenteeism in our plant,” Léger said. “I come to work every day and the first decision I face is which line to run and how to staff it.” He said his company’s salary costs alone have increased by $7 million a year.

Léger concluded his remarks with a warning, “USDA has announced plans to propose new Packers and Stockyards Act rules to regulate the interactions between packers and producers, and bills have been introduced in Congress that would place certain purchasing requirements on packers. Government intervention could jeopardize packers’ ability to provide products customers and consumers desire. The industry needs to be customer oriented; we must provide the products customers want.”

Committee members were given the opportunity to question the witnesses, and a wide range of sentiment was apparent from lawmakers. Glenn Thompson (R-PA) cautioned against “unintended consequences” of new or tighter regulations on packers from Congress or USDA.

Other Congressmen noted they have talked to producers in their districts who are demanding more negotiated cash trade. Randy Feenstra (R-IA) said he repeatedly hears about anti-competitive practices from packers and producers who are struggling financially.

"I probably represent the most independent producers anywhere in the country, and my producers sometimes can't even get in a bid, can't even get a bid, unless you're vertically integrated of course," Feenstra said.

Yet, Dusty Johnson, (R-SD), said “there is no consensus on 50/14,” referring to the proposed bills promising mandatory minimum negotiated cash trade for cattle. Johnson quoted the new Texas A&M report released this week that estimated billions of dollars would be lost by producers if packers were forced to increase negotiated cash trade.

NCBA’s Wilkinson, in answer to one lawmaker’s question, emphasized his earlier testimony.

“Let us have a chance to solve this problem,” he said. “Mandating this (from Congress or USDA) is clearly going to be problematic for cattle producers.”