Cattle grazing

A full House of Representatives committee hearing was held Oct. 7, where Congress members and industry representatives discussed consolidation and market issues in the livestock industry.

Photo by Kansas State University Research and Extension.

 

Continuing a string of livestock market hearings held over the past few months, the House of Representatives hosted a full Agriculture Committee hearing on “The State of the Livestock Industry” Oct. 7. In attendance at the hearing were representatives from various sectors of the livestock industry and USDA Secretary Tom Vilsack.

Sen. Chuck Grassley (R-IA) was also in attendance at the hearing and largely vouched for his legislation to mandate cash trade, commonly referred to as the 50/14 proposal. Grassley said the bill would help create the price transparency that’s needed in the marketplace. 

“I’m not upset about paying more for beef, I’m upset about farmers not making a profit,” he said. He added that some panelists may say otherwise, but “there is no denying we need serious reform in the way our country markets cattle.”

Representatives grilled Vilsack about hot industry topics, although most Congress members had questions relating to poultry, swine and other aspects of the industry. Vilsack’s time on the floor lasted nearly three hours.

“We know there is a high concentration in this industry, we know it creates capacity challenges, especially in beef, and there is a need for additional capacity,” Vilsack said in his opening testimony.

This is why, he said, USDA established a $500 million fund to strengthen small and very small processing facilities. The department is currently reviewing over 500 comments regarding the structure of the funding and will begin to release investment decisions early next year.

“Our goal is to strike a better balance between supply and demand, between processing and capacity competition, for greater transparency so that we can have a stable, dependent and fair market at the end of the day,” Vilsack said. “Our department is anxious to have fair prices for producers and for consumers.”

Rep. David Scott (D-GA-13), chairman of the House Agriculture Committee, asked Vilsack how a balance can be struck between the benefits and costs of concentration in the industry. Vilsack said the key is to have a resilient and efficient system, and small and very small processors need to expand capacity. 

“There’s more difficulty to get a fair price due to lack of capacity,” Vilsack said. He added that the two main barriers to enhancing meat capacity are capital and additional training and workforce. 

Vilsack was also asked several times about the ongoing Department of Justice investigation into price fixing in the cattle and beef industry, to which he replied that it is ongoing, and USDA is cooperating with the department. He said he was unsure of the investigation’s timeline.

Rep. Vicky Hartzler (R-MO-4) called attention to the “outdated” Packers and Stockyards Act, and how those who own sale barns cannot also own a packing facility. She asked whether USDA has considered removing this barrier to entry, to which he said it had not been discussed before, but he would bring it up with the committee reviewing the act.

Todd Wilkinson, vice president of the National Cattlemen’s Beef Association (NCBA), was one of the industry representatives who testified at the hearing. Wilkinson also owns and operates a cow-calf and feeding operation in South Dakota.

“As producers struggle to get by, the large meat packers rake in record-breaking profits,” Wilkinson said. “Profits that have not been equitably shared with cattle producers. The current marketing situation brought on by COVID, cyber security, plant fires and countless other factors have even the most seasoned industry veterans asking for changes. Something has to give.”

Wilkinson said NCBA has consistently come back to four major concerns in the industry: price discovery, market transparency, processing capacity and market oversight. Wilkinson said NCBA urges Congress to resist “one-size-fits-all” policy prescriptions, which may have disastrous unintended consequences. 

Scott questioned Wilkinson about what he meant by “one-size-fits-all.” Wilkinson said NCBA’s concern is that the packers aren’t actually going to be hit by a simple solution “silver bullet,” but rather the feeder, which will trickle down to the cow-calf operator. Scott also asked Wilkinson how disruptions could have been minimized in 2020.

“We have let this market get down to so few players, that they are largely controlling what is happening,” Wilkinson said. “If we had more packing capacity, they wouldn’t have this funnel that we have to pour everything through.”

Francois Leger, owner of FPL Food, testified on behalf of the North American Meat Institute. FPL Food sources cattle directly from producers and through auction barns, which Leger said creates a critical market for many Southeastern producers. The company also has a fed cattle operation in central Georgia.

“The cattle and beef industry is driven by supply and demand, and the cattle market is cyclical,” Leger said. “Not 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.”

He added that he had to sell the company’s value-added plant for the company to survive. Cattle producers need packers, and packers need producers, he said. Leger also stressed workforce and labor issues were some of the biggest issues.

Additional industry witnesses included: Scott Blubaugh, on behalf of the National Farmers Union; Scott Hays, vice president of the National Pork Producers Council; and Brad Boner, vice president of the American Sheep Industry Association. The House hearing took place for more than four hours, stretching past WLJ press time.

USDA also recently announced an additional $100 million in funding for the food supply chain. The funding would “leverage hundreds of millions more in lending through community and private sector lenders to expand meat and poultry processing capacity and finance other food supply chain infrastructure,” according to the department. The investments aim to create more opportunities and fairer prices for farmers and address bottlenecks in the food supply chain.

The announcement follows an earlier USDA declaration, committing to address concentration in the meat-processing industry, and a $500 million investment to expand meat and poultry processing. USDA said the loan guarantees will help: start up or expand entities in the food supply chain that aggregate, process, manufacture, wholesale or distribute food; address supply chain bottlenecks; and increase the resilience of the food supply chain. 

In response to the announcement, NCBA said it supported the measures to prioritize beef processing capacity and build a more resilient cattle industry.

“Our number one goal at NBCA continues to be opening up new opportunities for cattle producers to be profitable,” said NCBA Vice President of Government Affairs Ethan Lane. “The pandemic accentuated a number of vulnerabilities within our supply chains—chiefly the choke point at the meatpacking sector, which has resulted in unsustainable prices for cattle producers and increased the cost of beef for consumers.” Anna Miller, WLJ managing editor

 

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