Senate Ag holds cattle marketing hearing
The Senate Agriculture Committee held a hearing June 23 on problems in the cattle market that did not end with strong direction but seems likely to have an impact on reauthorization of the Livestock Mandatory Reporting Act.
Cattle producers in many states have been upset by low cattle prices amid high prices for boxed beef in recent years.
Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., told The Hagstrom Report after the hearing that the committee still has more work to do before it determines whether legislation is needed, but that “there is a lot of real concern among committee members about concentration” in the beef sector.
When asked about holding a hearing on the cattle markets a few weeks ago, Stabenow noted that there is no agreement in the industry about what to do about the problem. But Republican members of the committee, including Sen. John Boozman, R-Ark., put pressure on Stabenow to hold the hearing. The difference in partisan concern about the issue was apparent today when many Republican members of the committee who represent the biggest cattle-producing states showed up for the hearing while most Democratic members of the committee except for Stabenow and Sen. Cory Booker, D-N.J., asked questions via videoconference from their offices. The hearing was the first the committee has held with witnesses appearing in person in a year.
The star witness was clearly Justin Tupper, a cow-calf producer and manager of a livestock auction house in St. Onge, S.D., who is also vice president of the U.S. Cattlemen’s Association, a group of cow-calf producers, feedlot operators, backgrounders, and livestock haulers who are critical of consolidation and foreign ownership in the U.S. meat packing sector.
Tupper, who serves on the Commodity Futures Trading Commission’s Agricultural Advisory Committee, pointed out that in 1977, the number of cattle slaughtered by top four firms accounted for only 25% of total slaughter capacity, but that number increased to 71%.
“It is a wholly unsustainable model for the U.S. beef production chain to rely on such a concentrated number of players, especially when half are foreign-owned,” Tupper said, explaining that a fire in a Kansas plant and the slowdown in production due to the coronavirus pandemic had built concern to “the boiling point.”
Tupper said that Congress should:
▪ Direct funding authority to USDA to provide capital infrastructure improvement grants to communities for water sewage systems to support the development of independent slaughter and processing facilities.
▪ Provide tax income incentives to individuals who invest in the construction of independent slaughter and processing facilities.
▪ Direct funding authority to USDA to provide substantial grants, rather than cost-share programs, to individuals for the purchasing of re-use buildings and to upgrade the buildings to meet USDA Food Safety and Inspection Service regulations for the development of independent slaughter and processing facilities.
Mary Hendrickson, a rural sociologist at the University of Missouri, acknowledged that the current food production system in the United States is efficient even if it is concentrated, but that empty grocery store shelves and producers’ difficulties in finding slaughterhouses for their animals showed that the system is not “resilient.”
Booker asked Hendrickson if current antitrust laws could break up the meat companies, but she replied that she is not sure current antitrust law can be used to achieve the variety of ownership, including small firms and co-ops, that she believes is necessary to achieve resiliency.
Mark Gardiner of the Gardiner Angus Ranch in Ashland, Kan., who testified virtually because he had hurt his leg, said Livestock Mandatory Reporting should be enhanced to include more information, but said he fears that a proposal to require that a percentage of cattle be sold on the spot market would damage marketing arrangements that allow producers to get higher prices for higher quality animals.
Dustin Aherin, a vice president and protein analyst for Rabobank, said that he has raised cattle most of his life but that the differences between cattle prices and boxed beef in recent years were the result of market forces.
“I have to look at the beef industry from an objective, analysis-based perspective,” Aherin said. “First, cattle are not beef. Cattle are one of several inputs into beef production. Other major inputs include labor, physical capital, and technology. These inputs are always seeking, but never finding, the perfect balance between one another. This creates cycles. Input imbalances are communicated through prices, whether that’s cattle prices, wages.”
Glynn Tonsor, a professor of agricultural economics at Kansas State University, listed a series of “adjustments” he said should be made to livestock reporting.
Several Republican senators said their phones had been ringing off the hook with complaints from cattle producers, but the most vigorous questioner was Sen. Cindy Hyde-Smith, R-Miss., who said she had asked that the American Farm Bureau Federation be among the witnesses but had been turned down.
Hyde-Smith noted that her family has been in the cattle business for decades and that she considered herself the representative of the producers.
After the hearing, Tupper said that even though Stabenow did not announce a particular legislative proposal, he believes that Congress will act on the concentration issue.
Tupper acknowledged that the issues are complex and that marketing agreements to provide bigger payments for higher quality cattle are valid.
But Tupper said, “Four packers is not enough,” adding that the government did break up “Ma Bell.”
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