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35–050 PDF 2007

S. HRG. 110–125

ECONOMIC CHALLENGES AND

OPPORTUNITIES FACING AMERICAN

AGRICULTURAL PRODUCERS TODAY

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

APRIL 18, 2007

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

TOM HARKIN, Iowa, Chairman 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

KEN SALAZAR, Colorado 

SHERROD BROWN, Ohio 

ROBERT P. CASEY, Jr., Pennsylvania 

AMY KLOBUCHAR, Minnesota 

SAXBY CHAMBLISS, Georgia 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

LINDSEY GRAHAM, South Carolina 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

JOHN THUNE, South Dakota 

CHARLES E. GRASSLEY, Iowa

MARK HALVERSON, Majority Staff Director 

ROBERT E. STURM, Chief Clerk 

MARTHA SCOTT POINDEXTER, Minority Staff Director 

VERNIE HUBERT, Minority General Counsel 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

Economic Challenges and Opportunities Facing American Agricultural Producers Today ......................................................................................................... 1

Wednesday, April 18, 2007

STATEMENTS PRESENTED BY SENATORS 

Harkin, Hon. Tom, a U.S. Senator from Iowa, Chairman, Committee on 

Agriculture, Nutrition, and Forestry .................................................................. 1

Chambliss, Hon. Saxby, a U.S. Senator from Georgia ......................................... 2

Panel I 

Carstensen, Peter C., Professor of Law, University of Wisconsin Law School, 

Madison, Wisconsin .............................................................................................. 4

Hamilton, Scott, Poultry Grower, Phil Campbell, Alabama ................................. 12

Hayes, Lynn A., Farmers’ Legal Action Group (FLAG), Inc., St. Paul, Minnesota .................................................................................................................... 6

Muth, Mary K., Director, Food and Agricultural Policy Research Program, 

RTI International, Research Triangle Park, North Carolina ........................... 8

Schmidt, Tim, Pork Producer, Hawarden, Iowa .................................................... 10

Panel II 

Johnson, Burdell, President, American Sheep Industry Association, Tuttle, 

North Dakota ........................................................................................................ 38

Nelson, Eric, Ranchers-Cattlemen Action Legal Fund, United Stockgrowers 

of America (R-Calf USA), Moville, Iowa ............................................................. 30

Philippi, Joy, National Pork Producers Council, Bruning, Nebraska ................. 34

Queen, John M., President, National Cattlemen’s Beef Association, 

Waynesville, North Carolina ............................................................................... 32

Roenigk, William P., Senior Vice President, National Chicken Council, Washington, DC ............................................................................................................. 39

Truex, Ron, United Egg Producers, Warsaw, Indiana .......................................... 36

APPENDIX 

PREPARED STATEMENTS: 

Grassley, Hon. Charles .................................................................................... 50

Roberts, Hon. Pat ............................................................................................. 52

Carstensen, Peter C. ........................................................................................ 53

Hamilton, Scott ................................................................................................. 64

Hayes, Lynn A. ................................................................................................. 79

Johnson, Burdell ............................................................................................... 102

Muth, Mary K. .................................................................................................. 107

Nelson, Eric ....................................................................................................... 116

Philippi, Joy ...................................................................................................... 137

Queen, John M. ................................................................................................. 157

Roenigk, William P. .......................................................................................... 170

Schmidt, Tim ..................................................................................................... 177

Truex, Ron ......................................................................................................... 179

Page

IV

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

National Association of State Departments of Agriculture (NASDA), prepared 

statement .............................................................................................................. 186

QUESTION(S) AND ANSWER(S): 

Grassley, Hon. Charles: 

Written questions for Peter C. Carstensen .................................................... 192

Harkin, Hon. Tom: 

Written questions for Mary Muth ................................................................... 194

Roberts, Hon. Pat: 

Written questions for Mary Muth ................................................................... 196

Carstensen, Peter C.: 

Written response to questions from Hon. Charles Grassley ......................... 197

Muth, Mary K.: 

Written response to questions from Hon. Tom Harkin ................................. 199

Written response to questions from Hon. Pat Roberts .................................. 202

Written response to questions from Hon. Charles Grassley ......................... 205

Nelson, Eric: 

Written response to questions from members ................................................ 206

(1)

ECONOMIC CHALLENGES AND 

OPPORTUNITIES FACING AMERICAN 

AGRICULTURAL PRODUCERS TODAY 

Wednesday, April 18, 2007

U.S. SENATE, 

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY, 

Washington, DC 

The Committee met, pursuant to notice, at 9:30 a.m., in room 

SD–106, Dirksen Senate Office Building, Hon. Tom Harkin, Chairman of the Committee, presiding. 

Present: Senators Harkin, Lincoln, Salazar, Casey, Klobuchar, 

Chambliss, Thune, and Grassley. 

STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM 

IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY 

Chairman HARKIN. The hearing will come to order, as soon as I 

turn on my microphone, and we welcome you to one of our smaller 

hearing rooms that we have here in the Capitol. We have a number 

of votes coming up, but we will start and we will see how far we 

can get, and we will have to take some breaks and go vote and 

come back. But that is life around this place. 

Over the last several months, we have heard from a wide range 

of interested stakeholders to gain their input for writing the next 

farm bill. Today we will focus on hearing from representatives of 

the livestock, poultry, and egg industries. 

Animal agriculture is very important to the United States. The 

Economic Research Service estimates the value of U.S. livestock 

and poultry production in 2007 will be about $125.7 billion. The 

new farm bill can help play a role in expanding this. The farm bill 

will be critically important for expanding access to conservation 

programs, developing much needed research on distillers’ dry 

grains for animal feed, for animal diseases, promoting market access, cellulosic ethanol, and ensuring fair and competitive markets. 

As with any farm bill, there will be many different perspectives 

on all these issues, and I look forward to listening and learning 

from the witnesses here today. 

In the past 15 years, the animal industry has become more consolidated and vertically integrated. Basic open fairness and competition in markets have become a big issue. Today, in some regions of the country, there are only a handful of buyers of livestock 

left, and they frequently do not buy off of the open market. For 

2

some producers, they have only one buyer left, and this is a huge 

change from the time when I was young. 

This sets up an overly tilted marketing system where producers 

have difficulty getting bids for the livestock or are forced into some 

take-it-or-leave-it contracts with unfair terms. These producers 

have nowhere else to go to market their livestock or poultry, and 

for those producers that speak out against unfair practices or complain, they face retaliation. They stop getting bids on the open market, or they can lose their contracts. 

Producers of marketing livestock and poultry in consolidated 

markets are becoming less inclined to speak out about what they 

see going on in the marketplace. Producers fear that if they speak 

out, they will face retaliation, so I especially want to thank the witnesses today for providing testimony before the Committee. 

Congress worked to provide fairness in the marketplace before, 

and it can do so again. In 1921, Congress passed the Packers and 

Stockyards Act to keep markets fair. The Department of Agriculture has this important authority to enforce the act. But just 

last year, a report by USDA’s Inspector General—a report I commissioned—found widespread inaction, efforts to block investigations of unfair and anticompetitive conduct, and even efforts to 

cook the books to give the appearance of actual enforcement by the 

Grain Inspection, Packers, and Stockyards Administration at the 

Department of Agriculture. 

So basic fairness and transparency in the marketplace should be 

guaranteed in Federal law. If we are going to have a market-based 

system, if we are going to have true competition, then you have to 

have transparency. 

That is why I introduced the Competitive and Fair Agricultural 

Markets Act—to improve USDA’s enforcement of the Packers and 

Stockyards Act and to strengthen the Agriculture Fair Practices 

Act. That is why I have also worked to improve the Livestock Mandatory Reporting Act, along with other important market reforms. 

So, again, I look forward to hearing from today’s witnesses and 

working with you all on crafting a forward-looking farm bill that 

enhances and protects a market-based system. 

With that, I would yield to my colleague and our Ranking Member, Senator Chambliss. 

STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR 

FROM GEORGIA 

Senator CHAMBLISS. Well, thank you very much, Mr. Chairman, 

and I thank you for holding this hearing, and I certainly welcome 

all of our witnesses here today and look forward to hearing your 

testimony on the importance of livestock in the 2007 farm bill. 

Today’s hearing will allow key stakeholders in the livestock industry to detail their priorities on the upcoming farm bill. Last 

year, I had the honor of chairing eight farm bill field hearings 

across the Nation to gather information from farmers and ranchers 

regarding their farm bill concerns and priorities. I consider this an 

important part of an open and balanced legislative process. The information obtained during those field hearings and the testimony 

provided in hearings such as this one today will serve the entire 

Committee well as we begin our farm bill deliberations. 

3

The hearing today pays particular attention to an issue that is 

not new to this Committee or to the farm bill process: competition 

in livestock markets. This issue has been a constant topic since my 

arrival in Congress in 1994. Everyone who is concerned with agriculture understands the need for cattle, pork, poultry, and other 

producers to have every fair option at their disposal to market and 

sell their animals. I, like all of the members of this Committee, understand the importance of enforcing the Packers and Stockyard 

Act and other important antitrust laws that ensure an open and 

competitive marketplace. 

While I look forward to hearing from all of our witnesses today, 

I am a little disappointed that certain segments of the livestock industry are not included in this hearing. I am hopeful that as we 

construct a farm bill that will affect the entire livestock industry, 

we will include the input of all stakeholders, including the producers who raise the animals; the stockers, feeders, and background operations that feed them; the processors and packers that 

break them down into salable commodities; and the retailers that 

ultimately sell the finished product. All of these segments are critical to a competitive thriving livestock industry and marketplace. 

I believe in a fair and open marketplace for livestock market participants, and that is why I fought so hard last year alongside 

Chairman Harkin to reauthorize the Livestock Mandatory Price 

Reporting Act. That process demonstrated what we can accomplish 

when we work together with all interested stakeholders to arrive 

at consensus legislation that enjoys broad-based support. It is not 

always the easiest approach, but I believe it achieves the best results. 

In fiscal year 2003, Congress specified that the Grain Inspection, 

Packers, and Stockyards Administration of the U.S. Department of 

Agriculture use $4.5 million to conduct a study to address issues 

surrounding a ban on packer ownership. We are fortunate to have 

with us today Ms. Mary Muth of the Research Triangle Institute, 

the firm that conducted this congressionally mandated study. In attempting to address complex issues such as the proposed ban on 

packer ownership, it is critical that Congress carefully consider all 

expert analysis, such as the RTI study, before we determine whether restrictions on the use of captive supplies are warranted. 

In my part of the country, the livestock industry is dominated by 

cow-calf operators who utilize auction markets and alternative 

marketing arrangements to sell their animals. Many Georgia 

cattlemen and pork producers utilize alternative marketing arrangements to obtain higher prices for their animals and to accommodate niche markets, such as certified Angus beef. They also use 

these arrangements in an effort to satisfy export markets and to 

ensure the production of the higher-quality products that consumers demand. The proposed elimination of these types of arrangements could have a negative impact on my producers. Livestock and poultry producers today must compete in an imbalanced 

international marketplace that often rejects their product for unjustified and unscientific reasons. 

In addition, producers must compete for corn supplies with ethanol facilities, further raising their cost of production and making 

it more difficult for producers to be profitable. I urge my colleagues 

4

to employ a cautious approach as we consider legislative proposals 

that would potentially limit the options of producers by banning 

these types of arrangements. 

Finally, Georgia is the No. 1 producer of poultry in the United 

States, producing over 1.3 billion in broilers and over 4.8 billion 

eggs in 2005, amounting to over $2.7 billion in cash receipts. The 

poultry industry is obviously an integral component of the Georgia 

agricultural sector, and I look forward to hearing from our witnesses today who will discuss the poultry and egg industries. It is 

important that growers are treated fairly as they compete in the 

marketplace. It is also equally important that we continue critical 

research in areas such as avian influenza that will have tremendous benefits for humans and animal health. 

I again would like to thank everyone for attending this hearing. 

I look forward to hearing the testimony from all of our witnesses, 

and, Mr. Chairman, I once again thank you for your cooperation 

and for calling this hearing today. 

Chairman HARKIN. Thank you very much, Senator Chambliss. I 

again want to thank you, when you guided this Committee last 

year, for having all those field hearings around the country. They 

laid great groundwork for our farm bill and relieved me of going 

around the country and having all those hearings this year. So I 

really appreciate that. 

Also, I just for the record want to say that our staff had invited 

the American Association of Meat Processors to testify at this hearing, and they were unable to come—or they did not come up with 

a witness, but they were invited. 

Now, I am going to recognize this panel, and we will just go 

down the line here: Mr. Carstensen and Ms. Hayes, Dr. Muth, Mr. 

Tim Schmidt, and Mr. Scott Hamilton. All of your statements will 

be made a part of the record in their entirety. Because we are confronting and facing some possible votes here soon this morning that 

will cause us to be gone, I am really going to be fairly strict on asking you to hold it to about 5 minutes, give us the essence of what 

it is that you want us to know, and so we can have more of an 

interchange with you. 

I would recognize Peter Carstensen, Professor, University of Wisconsin Law School, and he has worked a lot on the series of issues 

involving the relationship of regulation to competition. Professor 

Carstensen, we will start with you and then just work down the 

line. Welcome to the Committee. 

STATEMENT OF PETER C. CARSTENSEN, PROFESSOR OF LAW, 

UNIVERSITY OF WISCONSIN LAW SCHOOL, MADISON, WISCONSIN 

Mr. CARSTENSEN. Thank you very much, Senator. It is a great 

honor to be here, and I am particularly pleased to see the bipartisan support for reform in the framework that we have for regulating agriculture. 

The thing that I think is most important to appreciate is that agricultural markets, both in the input and the output side, represent 

special problems in terms of risks of dysfunction in the market. 

This is partly because of the lags between the time one starts to 

plant a crop or acquire an animal and the time that it is available 

5

for market. But it also has to do with the disproportionate relationship of small producers, large buyers—that is, you have some inherent buyer power problems—with informational issues, with 

other kinds of negative consequences for the market. And added to 

that we have serious problems of increased concentration on both 

the input side and the output side. 

The role of law here, and especially the kind of law that this 

Committee addresses, is to facilitate fair, open market transactions. This legislation, like the Securities Exchange Act, like the 

Commodity Futures Trading Act, is one that is designed to facilitate the efficient operation of the market, and, unfortunately, it has 

really not functioned well in a whole variety of agricultural markets. And in my statement, I emphasized the problems first in the 

dairy world that come from increased concentration and the distortions that have resulted in purchases, buying processes of fluid 

milk; second, and the primary focus for your concerns here, I think, 

the livestock and poultry markets that we have, where, again, we 

are seeing increased concentration. I particularly here am concerned about the pending merger of Smithfield and Premium 

Standard brands that will greatly increase concentration not only 

in the Midwest but in the eastern part of the United States. In 

North Carolina, it will reduce the number of competing processors 

from two to one. We call that ‘‘monopoly,’’ and I am appalled that 

the Justice Department has not yet moved on that. 

I have looked somewhat at the RTI study, and, unfortunately, I 

think it is deeply flawed in terms of a forward-looking evaluation 

of alternative means and methods of marketing agricultural products, the marketing particularly here of livestock, in that it makes 

a simple-minded distinction between the cash market, which is bad 

apparently, and all other forms of contracting, whatever their 

flaws, which are apparently good. That is simply not the way to go 

about a forward-looking study that identifies desirable features of 

contracting, desirable features of particular cash transactions, and 

then ask how best can we adjust between and among these different instruments of policy. 

As I think you are aware, Mr. Chairman, there are some very serious problems with the way the courts have interpreted the Packers and Stockyards Act, especially in the recent Pickett decision. 

There is, I am pleased to report, a case out of Texas which takes 

a better view of the law. Whether that will be upheld on appeal, 

I do not know. But it is long overdue to revisit how the Packers 

and Stockyards Act’s provisions are interpreted because they absolutely require modernization so that they address unfair practices, 

discriminatory practices, especially denial of access to the market 

in a world where contracting is going to be a much more common 

feature. 

I want briefly also to emphasize another area which I think your 

proposal, Mr. Chairman, would provide important coverage in the 

market for various kinds of crops, especially corn and soybeans. I 

have spent some time in my written statement explaining both the 

emergence of contracting as a major new force in these markets 

and the particularly pernicious problems that exist because of the 

use of patented genetics on seeds and the kind of anticompetitive 

conduct of the genetic patent holders, especially I will name specifiVerDate 0ct 09 2002 11:51 Aug 24, 2007 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 C:\DOCS\35050.TXT SAG2 PsN: SAG2
6

cally Monsanto here because they are overwhelmingly dominant, in 

foreclosing important competition in the input side of the seed market. And my prediction of things to come unless Congress does 

something is that Monsanto is going to start imposing a tax on valuable corn and soybeans because, as I read the law, Monsanto has 

the legal right, right now, to tell farmers who raise Monsanto genetic soybeans or corn, ‘‘Here is the person you will sell to.’’ That 

is, they can sell the right for Monsanto to foreclose competition 

downstream. 

So the agenda you have got is an enormous one, and I wish you 

all the good luck in the world in dealing with it. 

[The prepared statement of Mr. Carstensen can be found on page 

53 in the appendix.] 

Chairman HARKIN. Thank you very much, Professor Carstensen. 

Now we will turn to Lynn Hayes from the Farmers’ Legal Action 

Group. Lynn was the founding attorney and program director at 

Farmers’ Legal Action Group in St. Paul, Minnesota. She received 

her BA degree in English from Coe College in Cedar Rapids, Iowa, 

and a J.D. degree from Columbus School of Law, Catholic University of America—my alma mater. 

[Laughter.] 

Chairman HARKIN. Welcome to the Committee, Ms. Hayes. 

STATEMENT OF LYNN A. HAYES, FARMERS’ LEGAL ACTION 

GROUP (FLAG), INC., ST. PAUL, MINNESOTA 

Ms. HAYES. Thank you. Over the past several decades, the markets for farmers’ agricultural commodities have experienced rapid 

consolidation of market share in the hands of a few large companies and a dramatic increase in vertical integration by packers and 

processors. This has resulted in the vast reduction in the number 

of buyers to compete for farmers’ products, a loss of transparency 

in the markets, manipulation of prices paid to producers, and an 

increase in the use of production contracts, and, most importantly, 

a horrendous imbalance of bargaining power between the farmers 

and processors. 

Today I want to discuss two principal ways the packers and processors have vertically coordinated their production. First is production contracts, using the poultry industry as an example, and the 

second is captive supply procurement methods in the red meat 

packing industry. 

The vast imbalance of bargaining power is exemplified in the 

poultry industry, which now 90 percent of production is done production contracts, where the company owns the birds and the producers on contract raise those birds. Those contracts are take-it-orleave-it contracts written by the companies. There is no negotiating 

by the farmers for the terms of those contracts, and consequently, 

they leave farmers with huge risks under those contracts. Farmers 

are encouraged to participate in these contracts through oral representations of their financial feasibility and the lifestyle benefits, 

which often are not borne out in the contract terms whatsoever. 

For example, the poultry interest broiler growers indicate they 

receive much less money, have much higher costs, and they have 

to work many more hours than the companies represented would 

be the case. However, once they find this out, they have already—

7

by the time they find this out, they have already made hundreds 

of thousands of dollars in investments in buildings and other facilities to raise the poultry, and at that point they are at the whim—

they are left to the mercy of the companies because in many cases 

there is only one or two companies that would pick up birds from 

the growers’ area. This leaves the growers with no bargaining 

power, but when they try to form bargaining associations, they are 

often retaliated against by the companies, by either manipulating 

inputs that reduce their prices or possibly just terminating their 

contracts. 

In the poultry industry, particularly the broiler growers are paid 

under tournament system where the growers are ranked against 

other growers in feed efficiency. However, the companies control 

most of the inputs that really control how well the producer is 

going to play on the feed efficiency front. 

Many of the contracts are for only one 7–week period for broiler 

contracts. The companies usually have the opportunity to terminate the contracts at will. They can require the growers to install 

thousands of dollars in equipment upgrades during the course of 

the contract. And the contracts also usually require disputes to be 

resolved there binding arbitration. 

Things that Congress can do to level the playing field on the bargaining power for growers is to require that all production contracts be in plain language and include a cover sheet that summarizes the material risks to the farmers, prohibit any confidentiality 

clauses or binding arbitration clause in the contracts, prohibit the 

tournament system of payment for poultry contracts, require that 

companies negotiate in good faith in all dealings with the growers, 

and to improve the Agricultural Fair Practices Act by requiring 

companies to bargain in good faith and not to retaliate against 

growers who are organizing in associations, and to make it unlawful for companies to participate in production contracts by using 

unfair, deceptive, or discriminatory practices. 

The other area I want to mention is captive supplies in the red 

meat industry. The Packers and Stockyards Act has for years prohibited unfair and deceptive practices. When Congress passed the 

act, it intended to prohibit both anticompetitive practices and unfair and deceptive and price-manipulating practices between packers and producers. 

Unfortunately, because USDA has failed to effectively regulate 

and define what kinds of practices are unfair and unjustly discriminatory, as the industries have changed we have lost much of the 

original intent. And this was demonstrated in the London court 

cases and the Pickett case that Mr. Carstensen mentioned, where 

the court had required producers to show anticompetitive practices 

in order to show unfair practices. 

To address these issues, the Packers and Stockyards Act should 

be amended to close the poultry loophole so that USDA can enforce 

the act in the same way against poultry dealers as red meat packers. And it should prohibit formula price forward contracts for the 

procurement of slaughter livestock, and all forward contracts 

should be traded in open public market. Packer ownership of cattle 

and hogs more than 7 days before slaughter should be prohibited, 

and the act should be amended to make it clear that anticompetiVerDate 0ct 09 2002 11:51 Aug 24, 2007 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 C:\DOCS\35050.TXT SAG2 PsN: SAG2
8

tive effect is not required to show an unfair, deceptive, or price-manipulating practice in violation of the Packers and Stockyards Act. 

Producers should also be allowed to file lawsuits to enforce the 

act in Federal district court and to be awarded attorneys’ fees when 

successful. 

Thank you. 

[The prepared statement of Ms. Hayes can be found on page 79 

in the appendix.] 

Chairman HARKIN. Thank you very much, Ms. Hayes. 

We have just been notified that a 15–minute roll call vote started 

at 9:48. I think we can hear from one more witness before we have 

to make a mad dash out of here, and so—and I do not know. I am 

trying to find out if there is one or two votes. I do not know. There 

are two votes? Well, let us hear from one more witness. 

Dr. Mary Muth, Director of the Food and Agricultural Policy Research Program at RTI International, an independent, not-for-profit 

research institute in the Research Triangle Park, North Carolina. 

She was the project manager for the congressionally funded GIPSA 

Livestock and Meat Marketing Study that was completed earlier 

this year. She has a Ph.D. in economics from North Carolina State 

University, an M.S. in ag economics from Cornell University, and 

a B.S. in agricultural and managerial economics from the University of California at Davis. 

Welcome to the Committee, Dr. Muth, and please proceed. 

STATEMENT OF MARY K. MUTH, DIRECTOR, FOOD AND AGRICULTURAL POLICY RESEARCH PROGRAM, RTI INTERNATIONAL, RESEARCH TRIANGLE PARK, NORTH CAROLINA 

Ms. MUTH. Thank you. Good morning, Senator Harkin and members of the Committee. I also wanted to add in with my bio that 

my husband’s family owns a cow-calf operation in western Kentucky, so some of the issues that I talk about hit pretty close to 

home. I am pleased to be here, and thank you for the opportunity 

to provide an overview of the findings of the Livestock and Meat 

Market Study. 

The study was conducted from July 2004 through January 2007 

by a team of researchers at RTI International, Iowa State, North 

Carolina State, Montana State, and Colorado State universities 

and the Wharton School at the University of Pennsylvania. The 

study addresses the economic effects that alternative marketing arrangements have on the livestock and meat industries. As you 

know, the cash or spot market includes auction, direct trade, and 

use of dealers and brokers. In contrast, alternative marketing arrangements include all other marketing methods, such as marketing agreements, marketing and production contracts, packer 

ownership, and forward contracts. 

In the final report for the study, we analyzed the extent of use 

and price differences across marketing arrangements and the effects of using alternative marketing arrangements on cash market 

prices; the costs and benefits of various marketing arrangements, 

particularly as they relate to quality, cost of production, and risk; 

and the implications of using marketing arrangements on livestock 

producers, meat packers, and consumers. We used state-of-the-art 

economic modeling and statistical analysis methods to address the 

9

requirements of the study using industry survey data, transactions 

data, and profit-loss statements from packers, industry interviews, 

and publicly reported data, including mandatory price reporting 

data. 

In general, the study found that use of alternative marketing arrangements provides benefits not only to meat packers but also to 

livestock producers and to meat consumers. Therefore, restricting 

their use would have negative economic consequences on most segments of the industry. However, the cash market serves an important role in the industry, particularly for small producers and packers. 

Next I would like to give a broad overview of the specific results 

of the study. 

First, regarding the volumes and prices of livestock under different types of marketing arrangements, based on the data available for the study, we estimate that alternative marketing arrangements represent 38 percent of the volume for fed cattle, 89 percent 

for finished hogs, and 44 percent for fed lambs sold to packers. 

Furthermore, we estimate that packer ownership volumes represent less than 5 percent of fed cattle and fed lamb volumes and 

20 to 30 percent for finished hogs. Based on the industry surveys 

and industry interviews we conducted, we expect use of alternative 

marketing arrangements in the beef and pork industries to remain 

similar to past use, but to increase somewhat in the lamb industry. 

In the beef industry, prices for fed cattle are similar for direct 

trade and marketing agreements, higher for the small percentage 

of auction barn cattle, and lower for the small percentage of forward contract cattle. We found that a reduction in the volume of 

spot market transactions, assuming that volume is shifted into alternative marketing arrangements, results in an extremely small 

decrease in the spot market price. 

In the pork industry, prices for finished hogs are higher for marketing contracts and lower for packer-owned hogs relative to the 

cash market. We found that there would be a relatively large effect 

of further increases in the use of alternative marketing arrangements on cash market prices for hogs. 

Second, regarding the costs and benefits of alternative marketing 

arrangements related to costs of production, in the beef industry 

procurement of cattle through alternative marketing arrangements 

is associated with lower production costs per head than through 

cash markets, but we found that this result actually does not hold 

for all packing plants in the data set. In the pork industry, procurement of hogs through alternative marketing arrangements is associated with a very small decrease in production costs at the packer. 

Related to quality of beef and pork, in the beef industry we found 

that cattle sold through marketing agreements were higher quality 

and had less variation in quality than cattle sold through direct 

trade methods. Similarly, in the pork industry, we found that hogs 

sold through marketing contracts are higher quality than hogs sold 

through direct trade. 

Related to market access and price risk, across all species, alternative marketing arrangements offer some guarantee of market access for both livestock producers and meat packers. Furthermore, 

10

use of alternative marketing arrangements generally reduces price 

or income risk for cattle and hog producers. 

Third, regarding implications of the use of alternative marketing 

arrangements, we conducted simulations of various hypothetical 

scenarios in which alternative marketing arrangements were restricted. Across all species, the economic modeling simulations indicate losses to livestock producers, meat packers, and consumers 

due to losses in efficiencies in the market. These losses in efficiencies translate into higher prices for consumers purchasing meat 

and lower prices for producers selling livestock. 

Mr. Chairman, I would like to enter into the record Volume 1 of 

the report for the Livestock and Meat Marketing Study. This volume contains the executive summary and the overview for the 

study. 

Thank you. 

[The prepared statement of Ms. Muth can be found on page 107 

in the appendix.] 

Chairman HARKIN. Dr. Muth, thank you very much, and we are 

into the second phase of the vote right now. I guess we have two 

votes, so if we leave now, we should be able to be back in about 

15 minutes, I think. So we will stand in recess for about 15 minutes. We will go vote and we will be right back. 

[Recess.] 

Chairman HARKIN. The Committee will resume its sitting. Next 

we will hear from Mr. Tim Schmidt, a pork producer from 

Hawarden in northwest Iowa. He farms with his three partners in 

a diversified operation that includes farrow-to-finish hogs, a cattle 

feedlot, along with growing corn and soybeans. And I am told that 

most of the corn produced on their farms is used by their livestock 

enterprises. Tim also serves as the President of the Sioux County 

Pork Producers. His wife, Mary, and two daughters, Karen and 

Callie, who both attend West Sioux Community School in 

Hawarden, so a real family farmer. 

Welcome to the Committee, Mr. Schmidt, and please proceed. 

STATEMENT OF TIM SCHMIDT, PORK PRODUCER, HAWARDEN, 

IOWA 

Mr. SCHMIDT. Thank you. Good morning, Chairman Harkin and 

members of the Committee. Thank you very much for inviting me 

here today to discuss some of the changes and challenges occurring 

in the U.S. meat production industry. I am Tim Schmidt, a thirdgeneration pork producer from Sioux County, Iowa. My partners 

and I operate a 250–sow, farrow-to-finish hog operation on a century farm. Prior to entering the partnership, I worked for a major 

packer in Nebraska for several years and also for an agricultural 

co-op. The strength and vitality of the U.S. pork industry is very 

important to me, and I serve in a leadership role in my county pork 

producer association. 

My comments today are about market access and market price 

changes that I have seen in the industry, stemming from consolidation in the US packing business. 

Over the years we have sold weekly loads of hogs after shopping 

around for bids from packers. Ten years ago, our farm could get 

multiple competitive bids from several hog buyers. Around 5 to 6 

11

years ago, we began having a hard time getting more than one bid 

from a group of buyers. Since we were only getting one bid, we 

ended up selling mostly to just one buyer. Today it is almost impossible to get a competitive bid on the 80 hogs we sell every week. 

So I have a less competitive bid and fewer market options. When 

you only receive one bid, the market price liquidity is poor, and 

market price transparency is questionable at best. 

So what changed between 10 years ago when bids were readily 

available and 5 years ago when they stopped? The packers began 

aggressively signing contracts for hogs with producers. Those contracts lock in hog deliveries to the buyers and push my cash sale 

hogs into a residual supply situation which drops buyers’ interest 

in competing for my hogs. 

The interesting thing about these contracts is that most of them 

have price components that are formulas based upon the open cash 

market. This means that those hogs get priced based on my residual supply. On rare occasions when the hog supply is really short, 

that spot cash market can spike higher, but when hogs are in adequate supply—which is most of the time—the market is residual 

and soft. A high supply of hogs can break the market downward 

hard. 

The consolidation of hogs under contract has made the market 

less liquid and less reflective of the true value of the hogs. 

Another point about changes in the approach of the packing industry revolves around our county pork producer association’s annual market contest. Each year eight or ten producers would bring 

in 20 hogs each to a packer on the same day and at the same time. 

We would have the hogs processed and compare the carcasses to 

see how well we were marketing and how our hogs compared for 

meat performance. Because we scheduled the hogs well in advance, 

the packer always knew when the hogs were coming. They handled 

that as a spot cash sale. We stopped doing it because the packers 

would not pay competitively the day the hogs were delivered. Association members, myself included, sold hogs to the same packer on 

that day that were not part of the market contest and received a 

higher market price. In essence, the packer took advantage of our 

desire to improve our hogs and work together as a group. That was 

disappointing to those that participated. 

Currently the Iowa Legislature is debating a bill that would require meatpackers to buy 25 percent of their animals from non-affiliated livestock producers. The bill, SF 504, was passed by the 

Iowa Senate last month. It is currently awaiting action in the Iowa 

House. 

I support the 25 percent open market bill because it would ensure more liquidity in the market and would ensure that contracts 

formulated off of the open market accurately reflect market conditions. 

I also believe that in order to ensure true market transparency, 

we need mandatory price reporting so that all hog prices are reported to the USDA and publicly reported each day. Factual information about all market price transactions—cash sales and contract deliveries—is an important key to market transparency. 

Besides my personal issues, I am concerned about the next generation of hog producers. Without open, transparent, and competiVerDate 0ct 09 2002 11:51 Aug 24, 2007 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\DOCS\35050.TXT SAG2 PsN: SAG2
12

tive markets, the young men and women who are the future of our 

industry will not have the opportunity to be independent pork producers. Without a level playing field, our rural youth with an interest in hog production will only have two options: to work for an integrator or to find another occupation. To limit their opportunity in 

pork production because we do not give them a free, open, and 

transparent marketplace would be a real shame. 

At issue today is not whether big farms or small farms are best. 

It is about independence and freedom that can only be achieved by 

having and maintaining a fair, free, and honest marketplace. In 

order to have that, we need more open market transactions in a reportable and transparent market. 

Thank you for listening. I appreciate this opportunity. If you 

have any questions, I would be happy to answer them. 

[The prepared statement of Mr. Schmidt can be found on page 

177 in the appendix.] 

Chairman HARKIN. Mr. Schmidt, thank you very much. 

Now we will turn to Scott Hamilton, a poultry grower from Phil 

Campbell, Alabama. He got into the poultry growing business in 

1995, after graduating from Auburn University. He also raises cattle on his farm, lives on the farmstead with his wife and two children, so another real family farmer. 

Welcome to the Committee. 

STATEMENT OF SCOTT HAMILTON, POULTRY GROWER, PHIL 

CAMPBELL, ALABAMA 

Mr. HAMILTON. Chairman Harkin, Ranking Member Chambliss, 

and members of the Committee, thank you for the opportunity to 

testify before you today on this important topic. 

As stated, my name is Scott Hamilton. I am a poultry grower 

from Phil Campbell, Alabama. I also raise cattle on my farm, 

where I live with my wife and two children. I graduated from Auburn University with a degree in zoology and later graduated from 

Auburn’s Agriculture and Forestry Leadership Program. 

The structure of U.S. agriculture has changed significantly in recent decades, and farmers are rapidly losing their independence. 

For many of us, that independence was lost long ago. 

I am here today to tell you a few of my experiences as a poultry 

grower with regard to the abusive practices that have become commonplace in poultry. 

Because of the large size of the poultry loan, growers usually 

have to put up their farmland and their homes as collateral. For 

most growers, you cannot shop around for other companies if you 

disagree with your company’s practices. There is very little competition in local areas. 

There are no negotiations. Either you sign what is put in front 

of you, or they do not bring you chickens. If they do not bring you 

chickens, you cannot make you mortgage payments, and you lose 

your family farm. 

Growers are ranked against each other for their pay. Basically, 

this means you can grow the heaviest bird and the least amount 

of feed. This is called the feed conversion. The company controls all 

of the inputs that determine your success in adding weight to the 

bird, the quality of chickens and feed, the length of time you keep 

13

your birds relative to the other growers. No matter how successful 

you are at raising their birds, the system is rigged so that half the 

growers get pay cuts to compensate for the other half that get bonuses. 

I am also here today to tell you that retaliation in the poultry 

industry is real. After I started to be more active in the Alabama 

Poultry Growers Association, I saw my ranking file and was placed 

on a probation program. I had sick birds through no control of my 

own. When you are put on this program, you need to show improvement in the ranking or the next step is termination, even 

though you have made a huge investment for the purpose of the 

contract and your ranking may have nothing to do with your own 

performance. 

Perhaps the most abusive contract clause that growers are facing 

currently in the mandatory arbitration clause. As poultry growers 

started to win lawsuits against poultry companies over contract 

abuses, companies started to present new contracts to their growers. These new contracts included provisions that essentially said 

that growers were waiving their right to take the company to court 

for any reason. Instead, the growers would be forced into a private 

system called ‘‘mandatory arbitration,’’ where a private group of arbitrators would hear their case and render the decision. 

But the up-front costs of this process are prohibitive. Some grow- ers have been handed bills for as much as $20,000 just to get an 

arbitration hearing. Further, unlike the public court process, there 

is limited right of discovery in arbitration, meaning that the grower 

cannot get access to the evidence that they need to prove their 

case. 

So what is the solution? Senators Harkin and Enzi have introduced legislation, S. 622, that addresses many of the concerns that 

I raise in my testimony. The bill would amend the Packers and 

Stockyards Act to give GIPSA the full authority, like in the red 

meat sector, to crack down on unfair and deceptive trade practices 

over the entire poultry industry, including breed hen and pullet 

growers. 

It would set a minimum contract standard, such as prohibiting 

pre-dispute, mandatory arbitration clauses, and assure that equipment upgrades are not made solely at the grower’s expense. It 

would also require companies to bargain in good faith with bargaining associations. 

As a poultry farmer from Alabama, I am honored to be here 

today providing this testimony. But at the same time, it is a sad 

commentary on the state of our Nation that I had to seriously consider whether or not my testimony here today would put me in financial jeopardy because of retaliation. 

Contracts are vital to the economy in this country. But it also 

vital that basic standards of fair dealing apply to contract relationships. 

In recognition of that fact, over 1200 organizations sent a letter 

to this Committee in January of this year, urging that a comprehensive competition title be in the 2007 farm bill. A copy of that 

letter is attached to my written statement. 

It is my hope that this Committee will include all of these provisions when the farm bill is drafted later this year. 

14

Thank you. 

[The prepared statement of Mr. Hamilton can be found on page 

64 in the appendix.] 

Chairman HARKIN. Mr. Hamilton, thank you very much. Thank 

you all for your testimony. I will start now a round of maybe 7 

minutes. If you can give me about 7 minutes, Bob, we will start a 

round of 7–minute questions here. 

I would just like to start where Mr. Hamilton just left off. You 

said in your testimony, ‘‘In no way am I arguing that contracting 

is a bad thing. Contracts are vital to the economy in this country. 

But it also vital that basic standards of fair dealing apply to contract relationships.’’

I cannot think of a better place to start than that because I tend 

to agree with that sentiment. I have often said that forward contracts and things, if they are done with transparency and with 

openness, with at least some semblance of equality between the 

contracting parties, can be a good thing. But there also ought to 

be a place in there for open markets also and for those that want 

to partake in an open market system. And as long as contracts like 

that are open, are transparent, as long as individuals who perhaps 

do not have a lot of economic power, as long as they are given some 

abilities to examine it, to be able to discuss those contracts with 

their families and their attorneys, then that could be OK. But that 

is not the situation we have right now. 

I just wanted to clear up a couple things about the study because, Dr. Muth, you were in charge of that study that we had set 

up. Now, again, you said it was a scientifically based sample, but 

there are about 67,000 hog producers nationwide. Your survey 

team surveyed 229 producers. Now, again, I am not a statistician 

so I do not know, but it seems to me that 229—can you assure us 

that that is a statistically valid sample? And why didn’t you get 

more than just that number? 

Ms. MUTH. Well, one thing to explain is that we did draw a much 

larger sample, it was a random sample drawn from the population, 

and we drew a much larger sample—a lot more producers than 

that were given the opportunity to respond to the survey. But ultimately we received 229 responses. 

Based on conversations with our statistician, who specializes in 

survey sampling procedures, this is close to adequate to represent 

the practices in the industry. You need a certain number to represent a large population, but it does not need to be a very large 

number. 

Chairman HARKIN. The RTI study assumes that hogs are sold 

through a national market where all producers are treated the 

same and have the same number of buyers. But, again, that is not 

realistic. The marketing of hogs is regional. Some regions have 

fewer buyers than others. So area’s producers have only one buyer, 

as we have heard. Market power is clearly different for different regions of the country, especially if one packer can dictate complete 

control over the producer. RTI stated that further investigation 

into market power was outside the scope of the report. 

So my question is: Why didn’t RTI examine the hog industry as 

a regional marketing system? 

15

Ms. MUTH. When we conducted the study, we were following the 

specific scope of work that was given to us under the contract, and 

under that contract, we were to look at the national-level effects of 

these alternative marketing arrangements. And we developed economic models to represent those relationships within the industry 

based on the questions we were asked to address in the study. And 

in terms of the specific regional differences, those were accounted 

for in a lot of the analyses by use of binary variables to account 

for differences in the regions. 

Furthermore, I did want to point out that in the study we did 

look at testing for the existence of market power in the pork industry. We used two different methods—one that is a more traditional, 

new empirical industrial organization approach, and another that 

was based on a more state-of-the-art modeling technique. In both 

of those instances, we did, in fact, find that there is evidence of the 

existence of market power in the pork industry. However, I also 

want to emphasize that in developing those models, you can find 

evidence of market power, but you cannot find intent to exercising 

that market power to take advantage of producers. So that goes beyond what we can say. 

Chairman HARKIN. So what you are saying is that the Department of Agriculture’s instructions to you was to base it on a national market rather than looking at regional? Is that right? 

Ms. MUTH. Right, to base the core economic models on a national 

market and to make adjustments for differences in regions. 

Chairman HARKIN. But could you have not looked at the regional 

markets to see how they operate and fold that into a national market? 

Ms. MUTH. Based on the data that are available, further analyses of regional differences could be conducted. 

Chairman HARKIN. Well, you said that RTI thought that further 

investigation into market power was outside the scope of the report. Is that right? 

Ms. MUTH. Actually there were analyses of market power in the 

study. That statement that comes from one portion of the report is 

at the conclusion where we have looked at two different methods 

of testing for market power. 

The study did not ask us to investigate whether or not—it was 

not focused specifically on market power, but on the use of alternative marketing arrangements. So we focused our analysis primarily on the use of alternative marketing arrangements and the 

effects of those on the market. 

Chairman HARKIN. I guess that is a criticism I have of the study, 

but maybe I have to direct this also to the Department of Agriculture. But we will figure that one out, you know, where the responsibility lies, whether it lies with RTI or with the Department 

of Agriculture. I am not certain about that yet. 

But, again, the conclusions in the report, I think, assume that 

Congress wants to prohibits contracts. There is currently no legislation in Congress that would prohibit contracts. This report also 

assumes that if there was a ban on packer ownership, the packers 

would incur increased costs that could then be passed on to producers and consumers. 

16

Why did RTI assume that if there is a ban on packer ownership, 

packers will have increased costs due to having to buy off the open 

market? Don’t you think that packers would instead increase the 

number of contracts they enter into with producers instead? 

Do I need to repeat the question? 

Ms. MUTH. Yes, there are multiple parts to that question. 

Chairman HARKIN. Why does RTI assume that if there is a ban 

on packer ownership, packers will have increased costs due to having to buy off the open market? Why wouldn’t you assume that 

they might just increase the number of contracts they have? 

Ms. MUTH. Well, when we conducted the analyses, we were 

asked to develop simulation scenarios to look at what the effects 

of different types of restrictions would be. Those were developed by 

the study team because the intent was not that we would give policy recommendations, but that we would look at some different 

types of scenarios that might possibly exist based on the judgment 

of the team members. 

When we looked at the ban on packer ownership, it was one of 

three scenarios that we looked at. We applied that in the hog industry to look at what those effects would be. One of the reasons 

why we assumed that there would be increased costs is because we 

assumed that if there was a ban on packer ownership, those hogs 

would be on the spot market. A different assumption could have 

been developed, but these were based on scenarios as we designed 

them for the study to look at some different alternatives. 

Chairman HARKIN. Well, I guess I am just wondering why that 

other scenario was not looked at, because obviously since there is 

no legislation that would ban contracts pending, then a ban on 

packer ownership, then you would have to look both at maybe increased contracts as well as open markets. But you only looked at 

one aspect. 

Ms. MUTH. Yes. Well, we also looked at a couple of other scenarios, and understand, again, these were not to look at particular 

policies that had been under consideration. These were just to give 

some comparisons so that you could see some relative magnitudes 

of differences, depending on what the situation might be. 

Chairman HARKIN. Thank you very much. My time has more 

than run out. 

Senator Chambliss? 

Senator CHAMBLISS. Thank you, Mr. Chairman. 

Mr. Carstensen, in your testimony, you request that Congress 

correct problems in the livestock market legislatively. You then go 

on to say, ‘‘The enforcement of current law, despite its limitations, 

is also a critical concern.’’ And I agree with that assertion that current law must be enforced if we are to have an open and competitive marketplace. I am concerned, however, that one of the remedies you advocate is the limitation of options for producers. 

Do you think it is appropriate for the Federal Government to decide how producers should and should not market their livestock? 

Mr. CARSTENSEN. Well, sir, the law constructs most markets. 

There are contract terms that are illegal for the sale of any kind 

of good. Where we get to more complex markets—and here, again, 

as I said in my earlier testimony, I think of securities markets and 

complex futures markets—there are all kinds of contract terms, 

17

practices of buyers and sellers that are outlawed because Congress 

has reviewed what makes markets work efficiently. 

The problem with a completely unstructured market is that you 

do not get the most efficient behaviors because the advantage of 

strategic conduct, of insider trading, of other kinds of behavior, outweigh the community’s benefit from having an efficient, fair, and 

open market. 

So that the law from the very earliest times has tried to restrict 

the alternatives that buyers and sellers can use to focus them on 

efficient market practices. This does not mean—and I think the 

Chairman has emphasized this—that I am against contracts. I 

think that contracting needs to be regulated so that we have fair 

and just terms, so that we make the market work efficiently. 

Senator CHAMBLISS. OK. Is there any available data for the Committee’s review that supports the argument that livestock producers would enjoy less volatility and higher prices if alternative 

marketing agreements were limited or prohibited? 

Mr. CARSTENSEN. Again, as we have just heard, one of the problems with the RTI study is that they did not do the kind of sophisticated forward-looking analysis that would have permitted us to 

identify those contractual practices that really contribute to market 

stability, those practices that contribute to market volatility and, 

therefore, help us identify the alternative marketing agreements, 

as I think is the generic term here, that were economically, competitively desirable. 

I am going to be very interested to talk to some of my colleagues 

in the ag econ department at Wisconsin to see whether we can 

mine the data because it does sound as though there may be some 

very useful information in this very expensive project that collected 

a lot of data that might help us answer your question. But it appears that RTI, which has the data, was not asked those questions 

and, therefore, has not done the analysis that would be necessary. 

Senator CHAMBLISS. But you do not know of any other study that 

parallels that that might provide some of that data? 

Mr. CARSTENSEN. Not off the top of my head. I will make further 

inquiries, sir, and if I come up with some suggestions, I will let you 

and the Chairman know. 

Senator CHAMBLISS. Good. Thank you. 

Ms. Muth, in your testimony you state that the use of alternative 

marketing arrangements provides benefits not only to meat packers but also to livestock producers and meat consumers. You conclude that restricting their use would have negative economic consequences on most segments of the industry. 

Can you expand on those statements for the benefit of the Committee? I am particularly interested in how livestock producers can 

benefit from these types of arrangements. 

Ms. MUTH. There are essentially three key ways. The first one 

is in reduced price risk and income volatility, and looking at the 

different types of marketing arrangements, we did find that there 

was substantially less price volatility under alternative marketing 

arrangements, particularly under marketing contracts for hog producers and marketing agreements for cattle producers, and also reduced income volatility under production contracts for hog producers that use those. 

18

The second thing is that they can benefit producers who use 

them when it allows them market access so that they can ensure 

that they have a market for their animals. 

And the third way that it can benefit them is in terms of providing the capital that they need in order to operate their production operations. In many cases, by having an ensured buyer for 

their animals, that allows them to raise the capital that they need 

to continue their operations. 

Senator CHAMBLISS. It is a common belief in some circles that alternative marketing agreements limit the marketing capability of 

small producers and will ultimately force them out of business. 

Based on that logic, limiting the use of alternative marketing 

agreements would ensure small producers a more competitive marketplace where they would enjoy higher prices. 

Your testimony seems to contradict that belief. For example, you 

state that increasing the hog cash market share to 25 percent from 

the current 11 percent would cause hog producers and pork consumers to lose economic surplus. This would indicate that small 

producers would not benefit from banning alternative marketing 

arrangements. 

Can you explain that a little bit further? 

Ms. MUTH. Well, in terms of, going back to looking at what some 

of the benefits might be, there is increased efficiencies at the packer level, that this allows them to continue their operations and to 

ensure that they have sufficient capacity utilization to operate 

their plants. By operating those plants, they are allowing a market 

for smaller producers. In some cases, packers are not able to secure 

enough livestock to operate their plants. There are substantial 

economies of scale in the packing industry. When you reduce volumes at those plants, their costs increase substantially and makes 

it less viable for the packer. If you have packing plants closing, 

that is also reducing market access for producers, including small 

producers. 

Senator CHAMBLISS. Mr. Hamilton, you raised several concerns 

about unfair contracting practices in the poultry industry, and you 

cite several instances that you have personally observed. And as 

you know, the poultry industry today is defined by vertical integration and companies that contract with family farmers. 

If there is one thing that could be done legislatively to address 

the many issues that you raise, what would it be? 

Mr. HAMILTON. If I had to pick one thing for you to do to help 

us? 

Senator CHAMBLISS. Right. 

Mr. HAMILTON. Get rid of arbitration, because if we can get rid 

of arbitration to where that we can discover what is going on, if 

we can go back to the courts, I think that you will see some of the 

companies, if they are doing what they are doing, they will stop it, 

because you are going to see it show up in the courts. 

Right now there is no cop on the beat. We have a hard time proving anything because we do not have access to the records, for one 

thing. We have to take everything as it is right now at face value. 

If they say they have brought me X amount of weight of feed, if 

they say they have brought me this type of bird, that they have 

19

been held to anything, I do not have access to the records of that 

flock number to indeed prove that. 

So if I had to choose one thing, it would be get rid of arbitration 

in my contract because then the court—that will give us access to 

the courts. You will probably see a rush of some lawsuits, and then 

after that, I think you will see it decline back down because you 

are going to have a cop on the beat regulating what is going on, 

and that will force them to eliminate some of the practices that 

they are doing. 

Senator CHAMBLISS. OK. Thank you, Mr. Chairman. 

Chairman HARKIN. Thank you, Senator Chambliss. 

Let’s see. Down the list next would be Senator Salazar. 

Senator SALAZAR. Thank you very much, Chairman Harkin and 

Senator Chambliss. Thank you for holding the hearing on the economic challenges and opportunities regarding livestock, poultry, 

and competition issues. I would also like to thank the witnesses for 

sharing their time and their expertise with our Committee today. 

Mr. Chairman, I would like to commend you for the hearing process so far on the farm bill. This is the first farm bill that I work 

on, and I have found the hearings that we have had thus far to be 

immeasurably valuable. 

In 2002, in the chairman’s mark at that time, there was a title 

on competition, and it included such subjects as country-of-origin 

labeling, packer ownership ban, contract items, USDA enforcement, 

and management provisions of USDA, and a whole host of other 

things. Let me ask a couple of questions of the witnesses. 

In terms of country-of-origin labeling, you probably have taken a 

look at that and have an opinion on it. Is it something that you 

think that we ought to move forward with? I know that in the agricultural community in Colorado there is a split of opinion and that 

there are some who think we ought to move forward with countryof-origin labeling and others who do not. 

Mr. Hamilton, I noticed in your testimony and in the letter that 

was submitted by all of the producers that signed up on your letter, 

country-of-origin labeling was included in there as something that 

we ought to do. So can you provide me and the Committee with 

some of your positions relative to country-of-origin labeling? 

Mr. HAMILTON. Yes. As a consumer, I want to see country-of-origin labeling because as a producer and being active as I am—and 

I think I keep up with things pretty well—I realized that there are 

some things going on in some other countries that we are not allowed to do here. In Alabama, for instance, a few months back the 

Commissioner of Agriculture condemned a load of catfish imports 

into Mobile because they had been using a substance that had been 

banned in this country for quite some time. So as a consumer, I am 

for it because I have seen it as a producer that some of these other 

countries, they are doing things that we cannot do, for whatever 

reason. And, you know, I do not want to get into that. But from 

the production standpoint of it, it has shown me—I believe that we 

have the safest and best food supply. And as a consumer, that is 

what I want to buy. If you want to buy different, have that choice. 

But if there are oranges from Florida and there are oranges from 

Mexico, give me the choice in the grocery story and let me as the 

consumer choose which ones I want to buy. 

20

Senator SALAZAR. Thank you. 

Mr. Schmidt? 

Mr. SCHMIDT. I would agree with Mr. Hamilton. I have supported 

country-of-origin labeling, and I believe the county pork board that 

I am on also supports that. 

I know there are some issues with country-of-origin labeling as 

far as it does not have enough scope, does not cover some products, 

especially hotel retail, institutional products. I also know there are 

some concerns that maybe some agricultural commodities are not 

covered in that. But from my standpoint, I believe in country-of-origin labeling, and I think it needs to be done. 

Senator SALAZAR. Dr. Muth? 

Ms. MUTH. Yes, in terms of what we looked at for our study, we 

did not look specifically at country-of-origin labeling, but one of the 

implications of country-of-origin labeling is that it would actually 

encourage individuals in the industry to move more toward alternative marketing arrangements so they can increase traceability in 

the industry. 

Senator SALAZAR. Ms. Hayes? 

Ms. HAYES. I believe that country-of-origin labeling is necessary, 

I think both for the reasons that Mr. Hamilton and Mr. Schmidt 

said, that there is concern about production practices in other countries, and that is a concern of the consumers as well as the producers in this country and that they should be allowed—consumers 

should have the opportunity to make choices on the kinds of production practices that they want to meet. 

I think it is also appropriate, however, that producers and consumers be able to support American industry by choosing to buy 

American products and American-raised products, not just because 

they are a higher quality but also because it is a way of supporting 

economically our own communities. 

Senator SALAZAR. Mr. Carstensen? 

Mr. CARSTENSEN. I would join in the general consensus that better consumer information is desirable. It is part of making markets 

transparent. 

Senator SALAZAR. Let me ask you, Peter, a question regarding 

your testimony. In your testimony, you state the importance of 

properly enforcing the laws that we have on the books, and so my 

question to you is: Do we need more laws or do we just need to 

have proper enforcement of the laws through USDA? 

Mr. CARSTENSEN. Both. That is, the problem—and the Chairman, 

when he started, mentioned the Packers and Stockyards Act was 

written in 1921. It has been modified a little bit. As Mr. Hamilton, 

I think it was, discussed, with poultry it no longer works in terms 

of the way the industry has evolved. 

So the arbitration issues, a number of issues like that, I think 

are best addressed by a revisiting of the statutes, expanding their 

coverage so that they will cover crops, so that they will be much 

more comprehensive than just the particular fixes that Congress 

imposed at various times in the past. 

I put dairy on the table as well because I think that that is a 

major area that needs reform. 

That said, Congress can only do so much. After that, you have 

got to have somebody who is willing to enforce the law. If there is 

21

some way to do something to get the Department of Agriculture 

under, I regret to say, both Democrats and Republicans, to understand that it is supposed to be a law enforcement agency and not 

a tool of special interests, that would solve a great deal of our problems. If that is not going to happen, then we are going to need to 

find other ways to make those laws workable. And, again, as Mr. 

Hamilton pointed out, if poultry growers can go to court, get some 

damages, get some injunctions, that is an alternative way to enforce the law, and you really need to think through how the law 

will be enforced, not just——

Senator SALAZAR. Let me interrupt you, since we have very limited time. 

Mr. CARSTENSEN. Yes, sorry. 

Senator SALAZAR. In terms of, you said, both Democratic and Republican administrations have failed to enforce the law out of 

USDA, why do you think that happens? 

Mr. CARSTENSEN. My guess is that there is a certain kind of political pressure brought on the Secretaries of Agriculture and those 

who make decisions in the Department of Agriculture that causes 

them to ignore their duties to enforce the law. 

I think there are also some complexities in terms of the history 

of how GIPSA has operated, the kind of economic support it has 

had; that is, it has not had an adequate staff, it has not had adequate enforcement authority within the Department of Agriculture. 

So that combination of factors and a long history of inactivity 

makes it very hard to get it restarted. 

Senator SALAZAR. Thank you very much. My time is up. 

Thank you, Mr. Chairman. 

Chairman HARKIN. Thank you, Senator Salazar. 

Let’s see. Next would be Senator Casey. 

Senator CASEY. Mr. Chairman, thank you very much. I want to 

thank you and Senator Chambliss for this hearing today, and especially with regard to the challenges and the opportunities that face 

the livestock industry. If the Chairman will permit me to do a little 

bragging about my State, we are known as the Dairy State, as 

members of this panel know, but I am also happy to inform you 

that we have got a tremendous ag production history, and we are 

about No. 3 in that. We have a great deal of hog farming in Pennsylvania. So the issues that you are discussing today are critically 

important to Pennsylvania and, of course, the Nation. And a lot of 

the farmers in our State who have come to visit us recently have 

discussed important issues like the classification of manure as a 

toxic waste under Superfund access to new export markets, and a 

whole range of other issues. We are going to be spending even more 

time with them. 

But I think one thing that I wanted to focus on today in the limited time that we have are the questions surrounding dairy farmers 

in Pennsylvania. Professor, I wanted to ask you one or two questions about this. 

First of all, with regard to your testimony today on a whole 

range of issues, but in particular with regard to dairy farming, do 

you think that allowing dairy farmers to forward contract directly 

with the processor of their choice would help alleviate some of the 

22

problems associated with having just a few processors control the 

market? And I have one additional question after that. 

Mr. CARSTENSEN. First of all, as somebody from Wisconsin, of 

course, we claim to be the Dairy State. I just need to get that into 

the record here. 

There is a potential for forward contracting or other direct contracting with fluid milk processors to provide an alternative. I 

think one has to be—because what we have heard from chicken, 

pork, beef, you really need to think through carefully the terms and 

conditions for the forward contracting, and you need—and this is 

the access point. Then you need to really say to fluid milk processor, ‘‘You have got to engage in this activity. You have got to 

offer those contracts,’’ because right now the problem is that the 

fluid milk buyer, the dominant one, has entered into an exclusive 

dealing contract with a single cooperative, which has foreclosed access to the market. And if you are not willing to block that kind 

of contracting, your forward contracts will not exist. 

Senator CASEY. And I wanted to ask you about the principal 

dairy problem in our State, which is the gross differential between 

what it costs the dairy farmer to produce the milk that he or she 

will produce versus the price that they can obtain. And I have 

spent a good deal of time not just talking about this issue, but also 

visiting people kind of on the ground, so to speak. One of them up 

in Wayne County in northeastern Pennsylvania, Joe Davitt, and 

his family have been doing dairy farming for years, but he is at the 

end of his rope. He said something which really made an impression on me. This young man is a college graduate, but he said, because of the challenges he faces, ‘‘What I have learned as a dairy 

farmer’’—and the struggles he has had to endure, he said, ‘‘There 

is not a wall big enough to fit that diploma.’’ And I thought it was 

an insightful way of talking about how difficult this work is. 

But do you have any advise or any comments on the question of 

how we can bridge that gap between the cost of production and the 

price that our farmers can obtain for fluid milk? 

Mr. CARSTENSEN. It is an extremely difficult problem to resolve. 

I was quite enthusiastic about the—I think it is the MILC program. 

Senator CASEY. MILC, right. 

Mr. CARSTENSEN. Because it provided a guarantee that varied 

with the degree to which your milk was used for fluid milk so that 

it had the appropriate direction. It was also capped so that it focused on supporting the small to middle-size dairy farm and left 

the very large cow operations, if they want to be in the market, 

they can be in the market. 

I think that something like MILC is probably the best route to 

provide the underlying support for dairy farmers to assure them of 

a basic kind of income. There are also market reforms that would 

facilitate increased price flowing down to the farm gate. One of the 

problems we had is that the price of milk has gone up at the grocery store because of concentration there, and that increased price 

has been split between the fluid milk processor and the grocery 

chain, and the farm gate has not seen any of that increased revenue. 

23

And so there are some other proposals out there that I am, 

frankly, a little more leery of that might put collars on prices and 

essentially say if you are going to raise the price of milk, that increased price has got to flow down to the farmer. But I think that 

is the goal. If price can go up in the market, the farmer needs to 

get a share of that. 

Senator CASEY. Thank you. 

Chairman HARKIN. Thank you, Senator Casey. 

Senator Klobuchar? 

Senator KLOBUCHAR. Thank you, Mr. Chairman, and thank you 

for holding this hearing on the issue of competition in the livestock 

industry. 

The State of Minnesota has many livestock producers. In fact, we 

produce about $1 billion worth of beef and nearly $2 billion worth 

of pork each year, and a little-known fact is that we are the Nation’s leading turkey producer. You did not know that, Senator 

Casey. 

My question is first of our Minnesota witness, Ms. Hayes, and I 

wanted to follow up first about what Mr. Hamilton was talking 

about, and that is the arbitration clauses. Do you think there is a 

legitimate need for mandatory arbitration clauses in livestock contracts, or are these being used to a farmer’s disadvantage? 

Ms. HAYES. I think the arbitration clauses are definitely being 

used to a farmer’s disadvantage. One thing about arbitration to 

keep in mind is that the farmer, in order to attempt to resolve a 

dispute through arbitration, actually has to pay what can be quite 

large arbitration proceeding expenses as well as the fees for the arbitrator. So it is essentially like having to pay for a judge to hear 

your case. So it can cost tens of thousands of dollars to go to arbitration, even on a relatively small issue. 

In addition to that, arbitration is the problem because it does not 

have any precedential effect, so once a case decides, for example, 

that the use of the tournament contract system was an unfair practice or something under the Packers and Stockyards Act, something 

like that, it is not going to hold true for any other grower, that it 

is going to apply just to the individual growers. 

And then another issue that was raised earlier was that there is 

no discovery in an arbitration proceeding in most instances, and 

discovery is the way in a court system you would have the opportunity to find out all of the evidence, essentially. So growers go into 

arbitrations without adequate evidence essentially to prove their 

case because that evidence is in the hands of the company rather 

than the grower themselves. 

Senator KLOBUCHAR. So what do you think would be a better 

way to help the farmers in this situation? 

Ms. HAYES. Definitely, I think, a ban on arbitration provisions in 

this. You know, there may be a rare instance where a grower, fully 

informed of the consequences of arbitration, could, after a dispute 

was raised, agree to go to arbitration. But, generally, I think they 

should be banned from being included in production contracts, partially because production contracts are essentially contracts of adhesion. They are written wholly by the company, but the growers 

have absolutely no negotiating power on the terms of those conVerDate 0ct 09 2002 11:51 Aug 24, 2007 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 C:\DOCS\35050.TXT SAG2 PsN: SAG2
24

tracts. Therefore, the contracts protect the company, not the grower. 

Senator KLOBUCHAR. And I also noted you were nodding your 

head when Senator Casey was asking Mr. Carstensen about the enforcement issues with the Agriculture Department. Could you talk 

a little bit about that? 

Ms. HAYES. Yes. I think there are a couple of important things 

to keep in mind under the Packers and Stockyards Act. For the 

poultry industry, one of the enforcement problems is that USDA 

does not have the authority to bring adjudicatory actions to enforce 

the unfair and deceptive trade practices section of the act against 

poultry dealers. They do have that authority to bring enforcement 

actions against red meat packers. They have not done a very good 

job of that, and I think that another way that the agency has failed 

to enforce the act is they have very broad regulatory authority, and 

it is very clear in the legislative history of the Packers and Stockyards Act that it was intended to be used to keep up with the 

changing structure of the industry. So they should have been looking at the industry as it became more concentrated and more 

vertically integrated and started defining what is unfair, what is 

unjust discrimination, what is price manipulation in this new context. And they have not been doing that. 

As a result of that, we have essentially through court decisions 

started to lose some of the original intent of the Packers and Stockyards Act—not that it was not there, it is just that it is not getting 

enforced because the agency is not doing it and the courts now 

have come out and started saying that you have to prove anticompetitive effect. Essentially you have to prove there is an anticompetitive effect between the packers in order to prove that a 

practice is unfair to a producer, which was never the intent of the 

statute. 

That is the reason why we need specific legislation that comes 

in and makes it clear that in order to prove an unfair practice or 

a price-manipulating practice, you do not have to prove an anticompetitive effect. So those are ways that the statute needs to be 

amended. 

We will always need the enforcement authority of the agency because, to a great extent, producers cannot afford many times to 

bring actions to enforce the act. Another way that you could improve that would be to authorize the award of attorneys’ fees for 

private causes of actions to enforce. But the agency will always be 

needed to be there, and what needs to be impressed upon them is 

the need to start defining unfair, unjust price-manipulating practices in the structure of this current industry. 

Senator KLOBUCHAR. Thank you. 

Mr. Carstensen, you talked about how the consolidation of the 

livestock industry is having the effect of putting farmers at an economically disadvantaged and vulnerable position. What would you 

say to producers who say that they actually prefer a production 

contract with the animal feed supply because then they do not bear 

a risk or have the liability? 

Mr. CARSTENSEN. Well, it may be individually rational to enter 

into various kinds of contracts in the context where your next best 

alternative is worse. So that a production contract that guarantees 

25

you something is going to look better than a cash market that we 

are now being told by the RTI study has an increasingly bad price 

consequence for farmers, as the point was made earlier in the pork 

industry in Minnesota and Iowa. So that, you know, compared to 

my alternative, this contract is good if we can regulate—this is why 

I keep saying the law needs to construct a set of rules that facilitate fair, efficient market operation, whether it is by contract or by 

cash market transaction. 

So it is perfectly rational to take a bad choice if your alternative 

is worse. That does not make the bad choice desirable. 

Senator KLOBUCHAR. Nicely put. Thank you. 

Chairman HARKIN. Thank you very much, Senator. 

Now we go to Senator Thune. 

Senator THUNE. Thank you, Mr. Chairman, and I want to thank 

the panel for your testimony. These are important issues, and 

based on my experience in my home State of South Dakota with 

livestock growers and organizations, sometimes these are not 

issues that generate agreement. There are differences of opinion 

between different agricultural organizations, as there are differences between individual neighboring producers in some cases. 

But to me the competition title in the farm bill ought to strengthen 

our antitrust laws to ensure that no single entity has so much market power that livestock producers and consumers are negatively 

impacted. And in my home State of South Dakota, we have a proposed acquisition of Premium Standard Farms by Smithfield. If approved, this merger would eliminate Premium Standard Farms as 

a buyer of hog and hog-feeding services. 

Now, the Department of Justice is currently reviewing this particular merger, which would have serious repercussions for hog producers throughout the Midwest and other parts of the country. In 

my view, this is a clear example of why our antitrust laws need to 

be strengthened, particularly as they pertain to the agricultural industry. 

What I would like to do is direct a question, if I could, to Mr. 

Carstensen regarding that merger. You referenced it in your testimony. What do you think would be the impact of the SmithfieldPremium Standard Farms merger on the competitiveness of the 

Midwestern hog market? 

Mr. CARSTENSEN. Well, as Dr. Muth pointed out, we already have 

clear evidence of market power in hog processing. This merger will 

significantly increase that kind of market power and will cause two 

kinds of problems in the Midwest. I should say it is going to cause 

even more problem in North Carolina, but I realize your focus is 

on the Midwest, sir. 

In the Midwest, we have two things that will happen. As you 

eliminate the competition between Smithfield and Premium Standard, you will reduce the ability of farmers to get the benefit of competition, and in the buyer power world, we need multiple competitors. And although Premium Standard’s operation is in northern 

Missouri, this is going to have a spillover or a reverberating effect, 

where I think it is very likely to see Smithfield pull out of South 

Dakota, move out of that more competitive part of the Midwest hog 

market, relocate its activities to the less competitive southern part 

26

of the Midwest, and thus, all hog producers throughout the Midwest are going to suffer lower market prices. 

The other thing that will happen is because Smithfield will be 

more vertically integrated after this merger, its incentive to engage 

in both price manipulation on the cash market which directly affects its contract prices and its incentive to use that strategically 

to harm both hog producers and its competitors will be increased. 

So, in my view, it is a very, very bad merger, and I am perplexed 

as to why the Justice Department has not objected to it strenuously 

already. 

Senator THUNE. And I want to follow up on that question, your 

view on Justice’s role in this, the Department of Justice, and 

whether or not they have been thorough in adequately reviewing 

this merger, if I could get you to comment on that as well. I know 

you have made some reference again to it in your testimony. 

Mr. CARSTENSEN. I did have the privilege of talking with a major 

investigative team from the Justice Department last October, along 

with some others, to raise concerns. My sense is that at a staff 

level, they have staffed this adequately. They have got people who 

are well trained—since one of them is one of my former students—

and quite able to do the analysis. 

They have a terrible track record of following through and getting the top management to actually bring lawsuits. They have not 

brought a major merger lawsuit now in a number of years. And at 

this point, there is no transparency in their process. 

I know that they have asked for a further delay in the merger. 

They have got another 30–day delay in the closing of the merger 

so that they can continue their review. That is somewhat unusual, 

and it suggests that they are giving serious attention. The proof of 

the pudding is whether they are actually going to take action, and 

on that one I wish I knew more. I could make a fortune in the 

stock market, I suppose. But, no, that would not be right. But, 

more importantly, we would all be able to know what is going on. 

But, unfortunately, I do not and I do not think anybody outside of 

Justice does. 

Senator THUNE. Let me ask you another question with regard to 

another proposed merger, and that has to do with, in the past several years, Monsanto, the world’s biggest seed enterprise, has acquired considerable market power in biotechnology, trademarked 

most notably its Roundup Ready corn and soybeans. Does the Delta 

Pine and Monsanto merger have additional anticompetitive implications for the corn and soybean market in the Midwest? And how 

is Monsanto’s increasing market power affecting the independent 

seed companies? If you could address that. 

Mr. CARSTENSEN. Yes. Again, this is another merger that has 

been under study at Justice for a long time. They actually had objected to it in 1998 when it was first proposed. The parties backed 

away. Now they are back again seeing whether they can sneak it 

through. 

The harm to the broad market is this: Delta and Pine Land is 

a major cotton seed producer and has contractual arrangements 

with several competitors of Monsanto. They are developing competitive genetic—herbicide-resistant genetic pesticide characteristics. 

27

If the merger is blocked, Delta Pine will be a principle developer 

of the technology and application first in cotton, but what that 

means is that it opens the door to being able to transfer these genetic characteristics to corn and soybeans. The minute we get competing genetic technologies for herbicide resistance and pesticide 

resistance in corn and soybeans, the price of corn and soybean seed 

is going to go down. 

So farmers in the Midwest have an enormous stake in how this 

merger is evaluated because, on the one side, we are going to get 

a much more competitive market in genetics, and that is very much 

to the benefit of farmers. To the other side, if it is not blocked, that 

competition is going to be further impaired as we go down the road, 

as new technologies are not made available. And as I laid out in 

my statement, the additional risk for farmers is that Monsanto, 

dominating all of this, is going to be in a position to start imposing 

a tax on the farmer. Every time the farmer wants to sell a soybean 

or a corn kernel that has a Monsanto gene in it, the farmer may 

have to pay a tax to Monsanto, or Monsanto will sell the right to 

buy from that farmer to particular grain elevators. 

A very, very serious problem here that needs to be addressed. 

Senator THUNE. Thank you. 

Mr. Chairman, I have questions for other members of the panel. 

I did not want to turn this into a two-way dialog here, but I do 

think as we review this issue that obviously the market works 

when there is competition, and in order for competition to be effective, there has got to be good transparency. And I hope as we look 

at these issues with regard to the next farm bill that we will keep 

that in mind, and we obviously want to be sensitive to making sure 

that the market can work and that the producers can manage their 

risk effectively, but that we have got an appropriate, effective level 

of competition out there and the transparency that is necessary to 

ensure that. 

So I thank you all for your testimony, and thank you, Mr. Chairman, for holding the hearing. 

Chairman HARKIN. Thank you, Senator Thune. Again, I look forward to working with you on this in the farm bill and obviously ask 

for any advice and consultation that you have on this issue. Obviously you know a lot about this, and I would respect your views 

and any input that you would have on this. So I ask for that. 

Next I turn to my colleague from Iowa, Senator Grassley. 

Senator GRASSLEY. Thank you, Senator Harkin, for holding such 

a very important hearing. Probably over the long haul, getting 

more competition in agriculture will do more for farmers’ income 

than what we do through the farm bill, although we will be doing 

both, hopefully, having competition very strongly involved in the 

debate in the Senate. And I think I made it clear that my position 

is to ban packer ownership of livestock and to get rid of mandatory 

arbitration clauses. Those are things that I worked on in the last 

farm bill. We did get it through the Senate. It did not survive conference, but hopefully this year these things of that nature will survive Congress. 

I am going to put an opening statement in the record, Mr. Chairman, and I have just a few questions. 

28

[The prepared statement of Hon. Charles Grassley can be found 

on page 50 in the appendix.] 

I am going to start with Mr. Carstensen. Isn’t it true that when 

the spot market drops to less than 10 percent with fewer packers—

I said that wrong. Isn’t it true that when the spot market drops 

to less than 10 percent with a few packers, the risk of price manipulation increases? 

Mr. CARSTENSEN. Definitely. 

Senator GRASSLEY. OK. Do you agree that consumer meat prices 

do not follow cheaper livestock prices? 

Mr. CARSTENSEN. I am sorry. Say that again? 

Senator GRASSLEY. Do you agree that consumer meat prices do 

not follow cheaper livestock prices? 

Mr. CARSTENSEN. The correlation is very weak. 

Senator GRASSLEY. OK. If you were selling, for example, a handmade product at a local auction, isn’t it true that you would rather 

have ten bidders than two or one? 

Mr. CARSTENSEN. Again, definitely. 

Senator GRASSLEY. OK. And then for Tim Schmidt, we have 

heard from the packers that contracting is necessary to provide 

quality incentives. But isn’t it true that the quality payment system and quality incentives are the same for hogs sold under both 

contract as well as in the open market? 

Mr. SCHMIDT. Yes, exactly. I follow all their quality requirements 

and need to meet those in order to sell my hogs to their facilities. 

Senator GRASSLEY. OK. Mr. Chairman, I have no other questions, and I will submit the others for the second panel. 

Chairman HARKIN. Thank you very much, Senator Grassley. 

Our time is running out, but I just want to ask one question. I 

will just go down the line and just kind a one-sentence or two-sentence answer I would certainly appreciate to this one question that 

I hope kind of sums it up. 

What do you think needs to happen to ensure that there is a fair 

and open market for small and medium-size hog operations and 

poultry operations like Mr. Schmidt and Mr. Hamilton, small and 

medium-size livestock operations? What do you think needs to happen to ensure that there is a fair open market for small and medium-size livestock operations? Mr. Carstensen. 

Mr. CARSTENSEN. First of all, we need full disclosure of contract 

terms; second, we need access for all producers through some form 

in which they can tender their livestock; and we need fair contract 

terms whenever we are going to be using a contract, and that is 

the regulatory structure that I have talked about. 

Chairman HARKIN. You are talking about getting rid of mandatory arbitration. 

Mr. CARSTENSEN. Yes. 

Chairman HARKIN. Ms. Hayes? 

Ms. HAYES. I believe that we need a ban on packer ownership of 

livestock. We need a restriction on forward contracting that would 

require all forward contracts to have a fixed-based price, not a formula-based price, because it is through the formula pricing that 

manipulation can occur, that all forward contracts be traded in an 

open and public market that makes it available to all producers, 

including small producers, and ensures transparency of those 

29

transactions. And then we also need to ensure that the Packers 

and Stockyards Act can be enforced for unfair and deceptive trade 

practices and make sure that terms in production contracts are fair 

and that there is adequate bargaining power between growers and 

the companies. 

Chairman HARKIN. Thank you very much. 

Dr. Muth? 

Ms. MUTH. Based on our experience working with transactions 

data from packers and profit-and-loss statements, to ensure the 

ability to conduct thorough analyses, to look at the relationships in 

the industry, standards for how transactions data and profit-andloss statement data are maintained would facilitate analyses of 

those relationships over time. 

Chairman HARKIN. Mr. Schmidt. 

Mr. SCHMIDT. I believe that pork producers should be allowed to 

sell at least a portion of their hogs on the open negotiated spot 

market, and I believe that those prices should be reported to the 

USDA Market Service along with alternative contracts, with the 

prices those producers are receiving also. 

Chairman HARKIN. Thank you very much. 

Mr. Hamilton. 

Mr. HAMILTON. We need balance. We need negotiation with our 

companies. We need them as much as they need us. The problem 

is everything is shifted to their side right now. 

Chairman HARKIN. But what needs to happen to ensure there is 

a fair open market for small and medium-size operations? 

Mr. HAMILTON. We need transparency in the market, and on the 

poultry side of it, the arbitration is the biggest thing. I think that 

needs to go. 

Chairman HARKIN. OK. Good enough. Thank you all very much 

for your testimony and for being here today. We appreciate it very 

much. You have added greatly to our thoughts and our information 

on developing this aspect in the farm bill. So we will dismiss this 

panel. Thank you again very much. 

We will call up our second panel: Mr. Eric Nelson, Mr. John 

Queen, Ms. Joy Philippi, Mr. Ron Truex, Burdell Johnson, and Mr. 

William Roenigk. 

Now, again, while the previous panel that we had was focused 

on the competition title in the farm bill, what we are going to do 

strictly on competition, this panel is more broadly based. I have 

asked you to come and just basically testify on broader issues. It 

does not have to be on competition at all, but on areas that affect 

you or the organizations that you represent. 

And so, again, the same thing, if you can sum up in 5 minutes—

we are supposed to be out of here by 12:30, so we are going to have 

to move. So I would ask you if you could just sum it up in 5 minutes or so, I would sure appreciate it, and we will just down the 

line. 

Mr. Eric Nelson and his wife own and operate a beef feedlot 

along with a cow-calf farming operation in western Iowa near 

Moville. Eric is a fourth-generation farmer-cattleman and operates 

the same land his great-grandfather purchased in 1920. They have 

five children. He serves as Region VI Director of R-CALF and the 

Iowa Membership Chair. 

30

Mr. Nelson, welcome to the Committee and please proceed. 

STATEMENT OF ERIC NELSON, RANCHERS-CATTLEMEN ACTION LEGAL FUND, UNITED STOCKGROWERS OF AMERICA 

(R-CALF USA), MOVILLE, IOWA 

Mr. NELSON. Good morning, Chairman Harkin, Ranking Member 

Chambliss, and members of the Committee. I appreciate the opportunity to testify about including livestock and competition issues in 

the 2007 farm bill. 

Again, as stated, my name is Eric Nelson and, along with my 

wife, Carol, and our five children, we do operate a beef feedlot, cowcalf, and farming operation in western Iowa, and as was stated, I 

am a member of the board of directors of R-CALF USA and am 

President of the Independent Cattlemen of Iowa. 

R-CALF USA is a nonprofit cattle producer association that represents thousands of U.S. cattle producers in 47 States, along with 

over 60 State affiliates and local affiliates. R-CALF USA’s mission 

is to ensure the continued profitability and viability of independent 

U.S. cattle producers. The demographics of the R-CALF USA’s 

membership are reflective of the demographics of the U.S. cattle industry, with membership ranging from the largest of U.S. cattle 

producers to the smallest. R-CALF USA’s membership consists primarily of cow-calf operators, cattle backgrounders, and feedlot owners. The 2007 farm bill presents an important opportunity to 

strengthen the cattle sector and create a competitive playing field, 

at home and abroad, for United States cattle producers. 

Ensuring a market framework that provides participants in the 

U.S. live cattle industry with the opportunity to remain profitable 

should be a central focus of the 2007 farm bill. A profitable and vibrant U.S. cattle industry is vitally important to the health of our 

citizens and the overall welfare of rural America. Today’s production agriculture, which, in addition to its principal role of producing 

an abundance of safe, wholesome, and high-quality food, now includes the development of biofuels and a heightened emphasis on 

international trade. This makes for a highly complex and dynamic 

industry that has created many overlapping and interconnected relationships. 

To effectively address the new complexities that were brought 

about by changes in national policy, we must adhere to sound market principles. For example, R-CALF USA believes that each segment of U.S. agriculture should have the opportunity to prosper at 

the same time, without pitting one group against another. This belief is based on our knowledge that competitive markets have long 

assimilated increased production costs without rendering entire industry segments unprofitable. 

When applying this principle to the Nation’s current policy of 

achieving more energy independence through alternative energy 

promotion, R-CALF USA does not join critics who claim the Government’s ethanol incentives are inappropriate. Instead, R-CALF 

USA believes the proper response by the U.S. cattle industry to 

this National Energy Policy is to work aggressively to remove the 

barriers that currently prevent the U.S. cattle market from assimilating necessary increases in productions costs. If appropriate reforms are made to enable U.S. cattle producers to begin receiving 

31

their competitive share of the consumer’s beef dollar and their competitive share of the consumer beef market, then they will be able 

to recover increased production costs from the competitive marketplace. Such reforms should be included in the farm bill’s competition title. These reforms would be inclusive of limiting packer ownership of livestock and packers’ use of certain captive supply contracts, strengthen the Packers and Stockyards Act, improve price 

transparency, allow interstate shipment of State-inspected beef, 

and, very importantly, put mandatory country-of-origin labeling 

into place. 

The removal of current market competition barriers from the 

U.S. cattle market would generate another benefit for the U.S. cattle industry, besides that of accommodating the Nation’s desire to 

achieve energy independence. Production agriculture is a capital-intensive endeavor, making it very difficult for young people to gain 

entrance. For generations, livestock production has served as the 

means by which young entrepreneurs have gained entry into agriculture. 

In 1930, my grandfather, with help from my great-grandfather, 

built a barn that still stands on our home farm. It took a lot of 

faith to build that large structure back in 1930, just months after 

the stock market crash of 1929. But they were livestock producers, 

and less than 10 years earlier, the Packers and Stockyards Act had 

reestablished a competitive livestock market, which provided hardworking entrepreneurs with a genuine opportunity to prosper in 

the livestock industry. The 2007 farm bill could again reestablish 

competitive livestock markets that would afford that same opportunity to a whole new generation of livestock producers. The core 

problem facing the cattle industry today that the 2007 farm bill can 

help to correct is that the overall framework that defines how our 

industry operates is no longer adequate to ensure a balanced and 

properly functioning competitive marketplace. The present industry 

framework comprised of the statutes, regulations, and policies that 

govern contracts and market competition, consumer information, 

and information disclosure, heath and safety, and trade have 

evolved under the considerable influence of the Nation’s largest 

meatpackers, and without sufficient counterbalance from producers. As a result, the balance of power within the present industry framework is tilted in favor of the meatpackers, resulting in a 

pricing advantage for them and an erosion of competition for livestock producers. 

Independent producers cannot match the economic or political 

power held by the Nation’s largest meatpackers. We cannot expect 

to level the playing field by correcting the deficiencies within our 

industry’s framework through negotiations with the meatpacking 

sector. Ironically, we are in an intense competition to win back 

competition. Therefore, our success in winning back our competitiveness will depend on you, the Congress. 

Thank you again for allowing me the opportunity to provide 

input in this important hearing. I welcome any questions from 

members of the Committee. 

[The prepared statement of Mr. Nelson can be found on page 116 

in the appendix.] 

Chairman HARKIN. Thank you very much, Mr. Nelson. 

32

Now we will turn to John M. Queen, President of the National 

Cattlemen’s Beef Association. He is the own of John Queen Farms, 

a third-generation cattle farm founded in 1917 and located in the 

western mountain region of North Carolina. His background in the 

beef industry includes cow-calf producer, stocker, backgrounder, 

feeder, and grazer. He is now currently serving as President of the 

National Cattlemen’s Beef Association. 

Welcome to the Committee, Mr. Queen, and please proceed. 

STATEMENT OF JOHN M. QUEEN, PRESIDENT, NATIONAL 

CATTLEMEN’S BEEF ASSOCIATION, WAYNESVILLE, NORTH 

CAROLINA 

Mr. QUEEN. Thank you, Mr. Chairman. My name is John Queen, 

and I am a third-generation cattle producer and livestock market 

operator from Waynesville, North Carolina. I am President of the 

National Cattlemen’s Beef Association and am pleased to be with 

you to discuss our policy on market structure issues, a policy which 

was brought forward by, debated by, and voted on by our rancher 

members. This is grass-roots policy where one-member/one-vote has 

always been the standard. 

When it comes to market structure and competition issues, the 

National Cattlemen’s Beef Association’s position is simple: We ask 

that the Government not tell us how we can or cannot market our 

cattle. The way we market cattle has changed significantly over the 

years, and it has come from recognition within our industry that 

we are not just cattle producers but beef producers and must be responsive to the consumers’ demands. The consumer focus has led 

to many innovative marketing programs that have improved the 

quality of beef, giving the consumer what they are asking for and 

allowing ranchers to get paid for the value they add to the animal. 

In addition to being responsive to our consumers, participation in 

these marketing arrangements provides a rancher with tools that 

help their operations and herd management. The ability to manage 

price risk is one of the most valuable of these tools. Taking advantage of marketing arrangements such as forward contracting allows 

producers to make a price that allows him to be profitable. If the 

price does not fit their needs, they can walk away and find another 

buyer. Being a ‘‘price maker’’ rather than a ‘‘price taker’’ puts 

ranchers in control of their business. Many ranchers who participate in these programs get information back from the feedlots telling them how their cattle performed. Information also comes back 

from the packer in the form of yield and quality grades. This information is critical in managing our herd and focusing on the traits 

which produce the highest quality animals. 

The benefits of the AMAs, or the alternative marketing arrangements, which we heard about earlier, was commissioned by GIPSA 

under the direction of Congress. The study took 3–1/2 years and 

$4.5 million of taxpayer dollars and was billed as the ‘‘definitive 

answer’’ on these issues we are discussing here. The study supports 

what many ranchers across our country have known all along—a 

market-driven system works. The overwhelming conclusion of this 

study is that overall, alternative marketing arrangements help all 

sectors of the industry, not just those that participate. 

33

The report states that the leading reasons ranchers participate 

in AMAs are the ability to buy or sell higher-quality cattle, improve 

supply chain management, and obtain better prices. 

When talking about improved supply management, we have to 

once again go back to the consumer. The consumer does not come 

into their local Safeway looking for Rancher’s Reserve beef only on 

Tuesdays. The consumer demands the convenience of picking up a 

package of Rancher’s Reserve beef any day of the week. To meet 

that demand, the retailer and packer need a steady and consistent 

supply of cattle that meet the qualifications of the store-branded 

program. If the packer is limited in its ability to source those cattle, the branded programs go away, the consumer chooses other 

products, and cow-calf producers get less money. 

So far, I have talked only AMAs, but approximately 62 percent 

of the cattle marketed today is done through cash or spot markets. 

Spot markets, such as auction barns, are critically important to the 

U.S. cattle industry. Ranchers who market this way cite several 

reasons for their choice. One reason is independence. Flexibility is 

also important to these producers. Selling on the spot market gives 

ranchers the opportunity to participate in market rallies. We must 

remember, however, that this only gives them the opportunity to 

catch the rally. Timing the market is always a difficult task and 

adds to their price risk. 

Even with traditional means of marketing, we have seen innovations that have been market-driven. One of these innovations is 

video livestock auctions. With this method, ranchers can auction 

their animals by video and reach consumers all across this country. 

The results of these innovations are telling. Demand for beef has 

grown over 20 percent since 1998—never heard of before in the history of our country. Consumers spent a record $71 billion dollars 

on beef in 2006. And consumer confidence in our product is at 91 

percent—higher than it was in 2003, when we had the BSE cow 

in Washington State. 

The study concludes that restrictions on AMAs would cause a decrease in the supply of cattle, quality of beef, and feed or cattle 

prices. These results would set our industry back and place the 

burden on the individual cow/calf producer. 

At a time where we continue to see an increase in feed costs due 

to competition with ethanol for corn, as well as an increase in fuel 

costs, the last thing we need to do is add more burdens to our 

ranchers. Keep in mind that for every agreement made by a packer, there is an individual rancher on the other side of that transaction who has decided that that agreement is in their best interest, and they should be allowed to conduct that business privately, 

just like any other industry. Restrictions or bans on AMAs will 

eliminate or significantly reduce these programs and hamper the 

progress we have made in keeping ranching a viable industry. 

In the end, we must have a Government that works to help our 

industry and not one that limits or removes choices for cattlemen 

in the marketing of their cattle. 

Thank you. 

[The prepared statement of Mr. Queen can be found on page 157 

in the appendix.] 

Chairman HARKIN. Thank you very much, Mr. Queen. 

34

Now we will turn to Joy Philippi, a pork producer, a row crop 

farmer from Bruning, Nebraska; Immediate Past President of the 

National Pork Producers Council, co-chair of the NPPC Farm Bill 

Task Force, and Chair of the NPPC’s Working Group on Foods and 

Ethanol and Livestock. 

Ms. Philippi, thank you very much for being here. Please proceed. 

STATEMENT OF JOY PHILIPPI, NATIONAL PORK PRODUCERS 

COUNCIL, BRUNING, NEBRASKA 

Ms. PHILIPPI. Good morning, Chairman Harkin, Ranking Member Chambliss. My name is Joy Philippi. I am a pork producer from 

Bruning, Nebraska, and a row crop farmer, and I am also the Immediate Past President of the National Pork Producers Council. 

NPPC is an association of 43 State pork producer organizations 

and represents the interests of America’s 67,000 producers. 

Pork producers have a keen interest in the next farm bill. NPPC 

formed a 2007 Farm Bill Policy Task Force to gather input from 

producers from around the country. As the next farm bill is written, we hope Congress will consider the needs of the Nation’s pork 

producers. Our desire is to maintain the industry’s competitive advantage globally, strengthen our competitiveness, and defend our 

competitiveness by opposing unwarranted and costly provisions and 

regulations. Please let me address some of the issues that likely 

will be considered in the next farm bill. 

Pork producers support the development and the use of renewable and alternative energy as a way to reduce our country’s dependence on foreign oil. But we continue to have the jitters over 

the rapid expansion of the corn-based ethanol industry and the 

challenges that expansion presents to maintaining our competitiveness. 

We are concerned about not having an adequate transition period 

to adjust to this expansion, the availability of corn to feed our pigs, 

and about market prices. And that is why we support allowing a 

51–cent-per-gallon blender’s tax credit and the 54–cent tariff on imported ethanol to expire, incentives for capturing and digesting 

methane from swine farms as an alternative energy source, and releasing early and incrementally, without penalty, CRP acres so 

they can go back into crop production. As you fashion your energy 

title, please consider our concerns. 

With regard to conservation, pork producers would like to see 

dismantled the regulatory hurdles we face in trying to incorporate 

conservation planning into our operations. Pork producers want to 

continue participating in USDA’s Working Lands Conservation Programs such as EQIP, but EQIP funds have not been allocated fairly 

to pork producers who, from 2003 through 2005, received just 3 

percent of the cost share assistance provided for all livestock. 

NPCC would like more EQIP funds for pork operations and would 

like those funds to be allocated for specific on-farm practices that 

have a clear environmental benefit. 

Animal well-being is a top priority for myself and for my fellow 

pork producers. We raise our pigs in a humane and compassionate 

manner, and our industry has a 20–year history of developing and 

using progressive animal well-being programs such as pork quality 

35

assurance and trucker quality assurance. We have invested hundreds of millions of dollars in research and practical applications 

that enhance our swine well-being. 

But our industry is under attack by those who would legislate 

how farmers raise livestock and poultry for food. In the next farm 

bill, so-called animal rights groups are planning to push for a number of provisions that, if adopted, would be very detrimental to the 

viability of the U.S. pork industry, including a ban on non-ambulatory or fatigued hogs from entering the food supply, a ban on certain antibiotics, and a ban on the use of sow stalls on farms that 

produce food animals that are purchased by the Federal Government. 

There are also efforts to limit how we market our pigs. The U.S. 

pork industry has enjoyed unparalleled prosperity over the past 3 

years, and this success has come while the structures of the U.S. 

pork industry and the pork and hog markets have changed. We 

urge Congress to focus not on structural issues but on the more important efficiency measures of conduct and performance as you deliberate the wisdom of any Government intervention. 

But we believe—and a recent GIPSA study concurs—that U.S. 

pork producers will not be well served if a particularly marketing 

or pricing mechanism is eliminated or mandated. Pork producers 

strongly support free trade agreements, but the extent of any future increase in global pork trade hinges heavily on continued efforts to bring about further agricultural trade liberalization. We 

support funding increases for the Market Access Program and the 

Foreign Market Development Program. We also encourage Congress to pass trade agreements which were negotiated with Peru, 

Colombia, Panama, South Korea, and also extend trade promotion 

authority. 

To protect the U.S. pork exports, we support programs such a 

Federal revenue-based assurance option that would assist producers should our export markets ever be interrupted. And, last, 

we would like to see continued funding for Government research 

related to our industry, including research on improving the swine 

genetics by completing the mapping of the swine genome, testing 

and deploying new and improved animal vaccines, further increasing animal productivity, and developing new and environmental 

and management and mitigation technologies. 

NPPC and the many pork producers we represent thank you for 

holding this hearing, allowing us to share the U.S. pork industry 

thoughts. We look forward to working with you, the Committee, as 

you craft the 2007 farm bill, and I would be glad to answer questions at the appropriate time. 

[The prepared statement of Ms. Philippi can be found on page 

137 in the appendix.] 

Chairman HARKIN. Thank you very much, Ms. Philippi. 

And now we turn to Ron Truex, President and General Manager 

of Creighton Brothers, LLC, United Egg Producers. Mr. Truex is 

the President and General Manager of Creighton Brothers and an 

egg producer in northeast Indiana. He has been in the egg production business for 37 years, has held several leadership positions in 

the industry, having served as President of the Indiana State Poultry Association, Chairman of the American Egg Board, and curVerDate 0ct 09 2002 11:51 Aug 24, 2007 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 C:\DOCS\35050.TXT SAG2 PsN: SAG2
36

rently as Chairman of the Government Relations Committee of 

United Egg Products. Ron also serves his community as an elected 

county commissioner in Indiana. 

Mr. Truex, welcome to the Committee and please proceed. 

STATEMENT OF RON TRUEX, UNITED EGG PRODUCERS, 

WARSAW, INDIANA 

Mr. TRUEX. Good morning, Chairman Harkin, Senator 

Chambliss. It is a privilege to be here this morning. As you said, 

I am Ron Truex, and I am President and General Manager of 

Creighton Brothers, a family owned farm since 1925 in Warsaw, 

Indiana. I chair the Government Relations Committee of the 

United Egg Producers. The United Egg Producers is the Nation’s 

egg organization. Almost 90 percent of all eggs in the United States 

are produced by our members. We appreciate being included in this 

hearing. The farm policies that you adopt will definitely affect our 

industry. 

In the past year, we have been affected by the booming demand 

for ethanol and biodiesel. Production costs for eggs have skyrocketed as rising demand for biofuels has driven up feed prices. 

About 55 percent of the cost of producing a dozen eggs is feed; 63 

to 65 percent of our typical layer diet is corn. 

From September of 2006 through the end of February in 2007, 

a typical egg operation saw almost a 60–percent increase in feed 

costs. During that period corn prices rose from around $2 a bushel 

to more than $4 per bushel. The cost of getting a dozen eggs to the 

grocery store went up around 10 cents a dozen. 

United Egg Producers supports alternative fuels as a part of the 

Nation’s strategy for energy independence, but we believe that U.S. 

policies must take into account the needs of egg, poultry, and livestock and dairy producers. 

In the 2007 farm bill, Congress should expand research to: one, 

commercialize technologies to make ethanol from cellulosic biomass; two, modify the DDGs and other byproducts to expand their 

use in layer rations; three, develop other renewable energy sources, 

such as power generation, using manure and mortality. 

Although tax incentives are not a part of the farm bill, we believe 

that any tax credit or similar benefits available to ethanol or biodiesel should also be available for other sources of renewable fuels, 

including products of the livestock and poultry industries. We also 

suggest that you explore making tax credits countercyclical so that 

they would be lower when oil prices are very high. 

During recent years our organization has spent more time on 

animal welfare than any other single issue. We feel strongly that 

animal welfare standards should be based on science, not emotion 

or politics. In the late 1990’s, we commissioned an independent, unpaid Scientific Advisory Committee that recommended industrywide guidelines for animal husbandry. About 85 percent of the producers have voluntarily adopted these guidelines, which are known 

as the UEP Certified Program. These guidelines have been well accepted by our retail and food service customers and provide assurance to consumers that the eggs they buy were produced under animal husbandry standards. 

37

We want this Committee to know that the private sector has 

been actively working on animal welfare because we are concerned 

that when you take the 2007 farm bill to the Senate floor, a variety 

of amendments could be offered that would be hostile to animal agriculture. These amendments may or may not have anything to do 

with eggs directly, but they might target other species groups instead. But our request to you is simple: Please vote against hostile, 

anti-livestock amendments that may be offered. Instead, please 

support our industry and its use of science, not emotion, to develop 

and implement voluntary animal husbandry guidelines in the private sector. 

We also feel strongly that the Nation should invest more in basic 

and applied agricultural research extension and education. Compared to the other scientific fields, Federal funding for agricultural 

research has been stagnant at best. The CREATE–21 proposal endorsed by land grant institutions is an important contribution to 

this debate, and we support its goals. 

We do feel that while better coordination between intramural 

and outside research is important, the Agricultural Research Service should remain a separate agency. For animal agriculture, research can help us not only make our farms more viable, but also 

serve the public goods. For example, the Government has paid increasing attention to air emissions from livestock and poultry operations. Already there are several technologies that show promise in 

reducing air emissions. The next step is to test them on actual 

farms in order to demonstrate their efficacy and economic feasibility. Once this is done, producers can begin to adopt new technologies. We hope this Committee will consider authorizing air 

emission mitigation research in the farm bill. 

Mr. Chairman, my written testimony provides additional details 

on these and other issues that are important to us. Once again, I 

appreciate your including the livestock and poultry industries in 

your hearings on the 2007 farm bill. Thank you. 

[The prepared statement of Mr. Truex can be found on page 179 

in the appendix.] 

Chairman HARKIN. Mr. Truex, thank you very much for your testimony, but you left out the single most important part of your 

written testimony, and that was knowing that Iowa is the No. 1 

egg producer in the Nation. 

Mr. TRUEX. That is true. 

Chairman HARKIN. I just want to make note of that for the 

record. 

Now we move to Mr. Burdell Johnson, President of the American 

Sheep Industry Association, a fourth-generation lamb and wool producer, who raises Columbia and Hampshire ewes and feed sheep 

through the family business, Diamond J Livestock. He also raises 

cattle and grows several crops, including wheat, corn, barley, oats, 

and sunflowers. He is a former ASI Executive Board representative 

for Region VI and also served on numerous ASI committees. He is 

currently President of the North Dakota School Board Association 

and serves on the North Dakota Insurance Reserve Fund. He and 

his wife have three children and two grandchildren. Again, another 

good family farmer, so welcome to the Committee, Mr. Johnson. 

Please proceed. 

38

STATEMENT OF BURDELL JOHNSON, PRESIDENT, AMERICAN 

SHEEP INDUSTRY ASSOCIATION, TUTTLE, NORTH DAKOTA 

Mr. JOHNSON. Thank you, Mr. Chairman and members of the 

Committee. I am honored to be here today to visit with you and 

follow up with the conversations you had at the field hearings with 

my fellow producers in Montana and Nebraska. 

I am very proud of the accomplishments that our industry has 

made in previous years, not too far off. We had our Flock Expansion Program that we have increased numbers in a couple of years. 

We have a successful industry-supported promotion program, and 

we have put American wool on the international market. The 2002 

farm bill deserves a lot of credit for us being able to accomplish a 

lot of this. 

One of the things that did come out of the 2002 farm bill was 

our Wool Loan Deficiency Program. This was a program for shorn 

wool and unshorn pelts on the LDP program. However, we feel that 

the loan base rate should be set at $1.20 rather than what it is 

right now. The way it is set now, only one out of the nine categories are being utilized. If it is set at $1.20, it will involve a lot 

more producers to use it. 

Another successful program for USDA is the National Sheep Industry Improvement Center. This is a program used to assist lamb 

and wool businesses through loans and grants to rebuild our infrastructure that was declining because of the loss of numbers. This 

came out of the 1996 farm bill. The only problem is we did not get 

to finish it before it run out. There was still $20 million that was 

authorized in the 1996 bill. We would like to see it reauthorized 

so we could continue to finish this program. I am a firm believer 

that once you start something, you finish it, and that is why I am 

pushing to reauthorize the National Sheep Industry Improvement 

Center. It has been a great program for industry. 

On the conservation side of the farm bill, we support a priority 

for prescriptive grazing using sheep to control noxious weeds and 

invasive species on the rangelands in the U.S., which is a big problem with these, and sheep can contribute tremendously in that 

area. 

We look forward to working with the Committee to reauthorize 

these two programs. They have been helpful not only to individual 

producers, but also to the entire industry. 

On the competitive side, we urge implementation of an interstate 

shipment of State-inspected meat. By allowing this to happen, it 

will open up more marketing opportunities in lamb. 

Also, mandatory price reporting is a big issue for us. This is what 

our price protection that we just got approved hinges on, mandatory price reporting, and it has a great effect on our industry. 

We also support the country-of-origin labeling with lamb. We 

have always been in favor of that. 

On the international level, we would like to see the Federal Government look at the sheep meat trade reform. Currently, the European government subsidizes their sheep industry $2 billion annually, and they have a very strict quota system on imported lamb. 

The industry looks forward to working with you in the future on 

a successful farm bill, but I would also like to add my appreciation 

for the disaster assistance that is in the works because of drought 

39

conditions. Examples of the drought conditions like in New Mexico, 

we have examples of where weaning lamb crops was as low as 35 

percent because of the drought. And the drought has continued all 

the way from Texas to my ranch in North Dakota. With this 

drought, higher fuel costs, and feed costs, disaster assistance will 

help a lot of struggling producers, which is happening at the time. 

Thank you very much. 

[The prepared statement of Mr. Johnson can be found on page 

102 in the appendix.] 

Chairman HARKIN. Thank you, Mr. Johnson. 

Now our last witness of the day, William Roenigk, Senior Vice 

President of the National Chicken Council. This organization represents companies that produce and process over 95 percent of the 

young meat chickens, broilers, in the United States. Mr. Roenigk 

oversees projects that involve industry and consumer market surveys. He serves on the U.S. Department of Agriculture’s Agricultural Technical Advisory Committee for Trade in Animals and Animal Products, and prior to his present position as Senior Vice 

President, he was Director of Economic Research and Membership 

Services for the National Broiler Council. 

Welcome to the Committee, Mr. Roenigk, and please proceed. 

STATEMENT OF WILLIAM P. ROENIGK, SENIOR VICE 

PRESIDENT, NATIONAL CHICKEN COUNCIL, WASHINGTON, DC 

Mr. ROENIGK. Thank you. Good morning, Chairman Harkin, Senator Chambliss. The National Chicken Council appreciates this opportunity to present our views and recommendations on the important issues in today’s hearing. My name is Bill Roenigk. I am Senior Vice President of the National Chicken Council, and I would 

note that in today’s operating environment, the number of challenges seem to far outweigh the number of opportunities. And for 

the record, Chairman Harkin, we do wish there were more chickens in Iowa, broiler-type chickens. I would also note that Georgia 

is the largest broiler-producing State, and so we are very pleased 

to be able to recognize that. 

Senator CHAMBLISS. If we could ever get them to Hatch some 

eggs, we might keep up with you guys. 

Chairman HARKIN. You have got the eggs. We have the broilers. 

Mr. ROENIGK. I would like to bring the Committee’s attention to 

what we think is a rather interesting and serious development, and 

that is, for the first time in 32 years, broiler production this year 

will be less than it was last year. Now, it does not happen very 

often—32 years, the last time was 1975. If you have had a chance 

to look at my chart on page 8, you are probably struck by the very 

sharp and continual uprise in our production. But if you notice 

from 1970 to 1975, there was a very flat period during that time. 

I hope I am wrong, but I believe we may be in now a period where 

we are going to go into another flat period of production. This is 

going to limit the opportunities not just for chicken companies, but 

it is going to limit the opportunities for growers. 

Companies have lists of people, growers who would like to add 

houses. They have people who would like to become growers. Those 

lists are going to become longer if our production stays flat rather 

than continue to increase. 

40

The reason production may not increase in the next few years is, 

as my statement says, due to Government policy—not entirely but 

primarily Government policy. That was the case in 1975 and 1973 

when our production last turned down. The primary policy I refer 

to is what some of the other people on the panel said, and that is, 

corn-based ethanol is causing a real change in our feeding arrangement. 

You will notice in my statement, if you look a year ago when 

USDA first made the forecast on per capita consumption of the various meats, it was a rather rosy forecast, especially for broilers, at 

over 88 pounds per person. Now they say 85 pounds. When you add 

up all the meats, it is a change of 5.6 pounds from the first forecast, not all due to ethanol but a significant part of it is. And these 

fewer pounds mean fewer opportunities to generate income, jobs, 

and local and national economic activity. 

The challenge to getting back on the upward track is to make 

sure there is enough corn, not just for ethanol and not just for exports, but for animal agriculture also. 

In my statement, I list two ideas that could be applied to the 

Conservation Reserve Program, and time does not permit me to get 

into that. One of those was borrowed from the soybean producers, 

which I think is a pretty good idea. 

I also suggest in my statement that there needs to be a relief 

valve in case there is a significant shortfall in the corn crop. And 

I understand corn has a difficult time going into the ground in the 

Midwest due to the cold and wet ground. We need to get the corn 

in, we need to get it up, and we need to have an excellent harvest 

if we are not going to have a problem. If we do have a problem, 

there needs to be some way to address a significant shortfall. 

I also mention in my statement that the USDA and related agencies are doing an excellent job on biosecurity safeguards and firewalls, keeping highly pathogenic avian influenza out of our flocks, 

and there needs to be continued good budget and resources to allow 

those agencies to do that. If we did get influenza in our flocks, I 

believe the issues before this Committee would be much different 

than whether or not mandatory arbitration is the most appropriate 

mechanism in a contract. 

The Foreign Agricultural Service and APHIS have been very supportive in building our exports. We need exports, especially our leg 

quarters. The American consumer prefers boneless skinless breast, 

and the export market allows us to move our leg quarters into foreign markets. 

USDA’s Environmental Quality Incentive Program, as was mentioned earlier, needs to be fully funded. Growers are good stewards 

of the land, water, and air, and EQIP will allow them to continue 

to do that. 

The Committee has talked quite a bit about market structure, 

but we would respectfully submit that priorities for the Committee 

and Congress should be not necessarily on restructuring the 

vertical integration and contract arrangement in the chicken industry. It has worked well for more than 50 years, and as I mentioned, 

companies have lists of people who would like to get into growing 

chickens. Some of the panelists today would like the Committee to 

believe that somehow the companies have been able to successfully 

41

misinform for more than 50 years not only the growers but the people who provide substantial quantities to finance these operations. 

I submit that the system is working pretty well. 

I appreciate the opportunity to provide our views and comments 

and look forward to your questions. 

[The prepared statement of Mr. Roenigk can be found on page 

170 in the appendix.] 

Chairman HARKIN. Thank you all very much for your testimonies. I just have a few questions, and then I will yield to my 

friend from Georgia. 

I am going to get off of the issue of competition. I heard all your 

testimonies, and I have that. I would like to delve into a couple of 

other areas. 

Ms. Philippi, your testimony points out that pork producers have 

not benefited from the EQIP program as much as other producers. 

You stated that pork producers only receive about 3 percent of the 

cost-share assistance provided to other livestock producers. Some of 

this is due to EQIP giving priority to producers needing immediate 

help rather than providing assistance to improve existing system. 

But what recommendations would you have to address this issue? 

Ms. PHILIPPI. One thing that we believe we need to do with the 

EQIP dollars is make sure that it is easy, that we can go in and 

with the right application, that they are available for us. You 

know, I talk about getting rid of some of the hindrances to the program. One of the things that we need to do is look at how operations need to be improved. They go through the permitting process, and then quite often they have to wait to find out how they 

could get EQIP dollars. 

We would like to see the livestock industry get the dollars that 

were appropriated the last time. The last time you talked about 

that we should get the lion’s share of the EQIP dollars to use for 

our projects. And it seems like we just got slowed down in the qualification process, and we did not get access to the money as we 

should. 

Chairman HARKIN. For all of you, and if I can just get a one- or 

two-sentence answer to this question, I would appreciate it. USDA 

for several years now has made an attempt to implement a national animal identification system. I have heard from producers 

upset that they do not what is expected of them or how the system 

will cost their operations or if the information will be kept confidential. I also hear from producers concerned that it is taking 

USDA too long to implement the system. 

Again, I am told by my staff that we can expect a report coming 

out soon from GAO, a report of an investigation we asked for, that 

will shed light on how well USDA has implemented the system. 

So my question basically is: Do you think USDA has implemented the animal identification system in a common-sense manner? And what would be the best action to get Animal ID back on 

track to ensure that it is a feasible, practical system? Mr. Nelson. 

Mr. NELSON. Well, R-CALF USA I guess would look at the journey that Animal ID has been on to date, and, you know, it initially 

started out it was going to be a mandatory program and then 

moved to a voluntary system. And we have actually made a proposal that there is a workable program that has already been in 

42

place, and it revolves around the brucellosis testing program that 

is already in already in place with permanent metal ear tags that 

go on the females in the cow herd, and it already allows the 

traceback system. It has been proven, it is workable, and it would 

not be burdensome, expense-wise, on producers. 

Chairman HARKIN. I will go down the line, is there anybody else 

that wants to add to this, Mr. Queen? 

Mr. QUEEN. Yes, Mr. Chairman. We at NCBA have always been 

for a voluntary, cost-efficient, market-driven Animal ID system, 

and I think it should be that way because the ID adds value to our 

commodity, but it should be a willing or voluntary effort on those 

producers. It does not make our commodity any safer. There is no 

science-based evidence out there that shows that beef is safer if it 

has an ID button in it. 

So voluntary ID should be what we strive for in this industry, 

here again not dictating to those producers out there what they 

have to do with that animal. 

Chairman HARKIN. Ms. Philippi? 

Ms. PHILIPPI. The swine industry believes that ID should be 

mandatory. We have used it——

Chairman HARKIN. Should be what? 

Ms. PHILIPPI. ID needs to be mandatory. We have used it since 

we had the pseudo-rabies program put in place. It worked to eradicate that disease. We believe in mandatory premise registration 

and a mandatory ID system that will protect the herd health of our 

industry. 

Chairman HARKIN. Thank you. 

Mr. Truex? 

Mr. TRUEX. The egg industry has no problem, and as you know, 

we have worked for a flock ID instead of an animal ID because of 

just the numbers of poultry in a building. And then our concern 

would be the confidentiality of that information. 

Chairman HARKIN. All right. Mr. Johnson, lambs? 

Mr. JOHNSON. The American sheep industry already has a mandatory identification through the Scrapie Eradication Program, and 

we feel as long as this NIS is put together in conjunction with that 

so we can run it together, we have no problem with it. 

Chairman HARKIN. Does it affect you at all, Mr. Roenigk? 

Mr. ROENIGK. I would suggest that we already have flock identification. Essentially, all commercial companies participate in the 

National Poultry Improvement Plan, and that does identify the 

flocks. So I would suggest that we are already there. 

Chairman HARKIN. Thank you. 

Mr. Johnson, I am intrigued that in your written testimony you 

discussed how invasive species and noxious weeds are damaging 

land productivity, decreasing water quality and quantity, and degrading wildlife habitat. And you talked about how sheep can provide biological control of weeds. 

Now, again, obviously this has to do with conservation, what we 

are going to be doing on conservation lands and things like this. 

What types of incentives would you like to see in the Conservation 

Title that would encourage the use of sheep to control invasive 

plants? 

43

Mr. JOHNSON. Well, if you put programs together where you can 

take sheep into areas where there are noxious weeds growing and 

pay these producers to graze them there, it would give them a little 

more income. Sheep will eat noxious weeds where other species will 

not touch them. It has been proven, especially with leafy spurge in 

my particular area, where we can get lamb back into production by 

grazing sheep on the spurge, and then you can follow with cattle 

afterwards. It works very well. 

Chairman HARKIN. Repeat again for me. Are there any incentives, anything we need to put in the Conservation Title? Tell me 

again. 

Mr. JOHNSON. Well, one of the biggest things with this is predator management, when you move them out into areas where there 

are wide open spaces. So if you can have more money for predator 

control and also incentive for sheep ranchers to take their sheep 

out into other areas on land that they do not own or lease, just to 

graze, to get a multispecies grazing program going to enhance the 

production of grass. 

Chairman HARKIN. I am running out of time. One last question. 

For many years there have been efforts to remove the restrictions 

on interstate shipment of meat from State-inspected facilities. 

Somebody mentioned that in their testimony. Was that you? 

Mr. JOHNSON. Yes, Mr. Chairman, I did mention that. 

Chairman HARKIN. But to give some perspective on this, I have 

been around this a long time, and I chaired the Livestock, Dairy, 

and Poultry Subcommittee in the House in the early 1980’s, and I 

chaired a hearing on this issue. For many years large meatpackers 

opposed the legislation. Now they seem to be more open. But now 

the food safety advocates oppose it, so it kind of gets bounced 

around. As I say, I have been watching this for 25 years. 

For those on this panel, does everyone agree that there should 

be interstate shipment of meat from State-inspected plants? And 

would interstate shipment of meat from State-inspected plants help 

to improve competition in the meatpacking industry? So two questions. Do you support that? And if you do, do you think this might 

increase competition? 

I would just, again, go down the line. How would you feel about 

this? 

Mr. NELSON. Yes, we definitely support the interstate shipment 

and feel that it would definitely improve competition. 

Chairman HARKIN. Mr. Queen? 

Mr. QUEEN. We, too, sir, and this is the No. 1 thing that can help 

competition within the packing industry. 

Chairman HARKIN. Ms. Philippi? 

Ms. PHILIPPI. Well, that is an issue that we do not talk about as 

much as we probably should at times, and we do not see there 

could be any advantage competitively. 

Chairman HARKIN. You do not have a position on interstate shipment of State-inspected meat? 

Ms. PHILIPPI. No, we do not. 

Chairman HARKIN. Thank you. 

Mr. Truex? 

Mr. TRUEX. Nor does the egg industry. 

Chairman HARKIN. Mr. Johnson, obviously you do. 

44

Mr. JOHNSON. We do support it, but we also are a little cautious 

that the State programs have a high enough standard so we know 

the inspection service is there. 

Chairman HARKIN. Mr. Roenigk, do you have anything? 

Mr. ROENIGK. We would ask the question, if the State inspector 

plant meets all the USDA requirements, why not be a USDA 

plant? If there was a change for poultry, I do not think it would, 

as far as competition, change things very much. 

Chairman HARKIN. Well, you know, Mr. Roenigk just raised 

something. My time is up. I assume in your answer you are saying 

as long as they meet the Federal standards, right? I see you nodding. I think that is probably generally accepted. Thank you all 

very much. 

I will turn to my colleague, Senator Chambliss. 

Senator CHAMBLISS. We talked about animal ID. What about 

country-of-origin labeling? Mr. Nelson, let’s start with you. 

Mr. NELSON. Mandatory country-of-origin labeling is very important. We spend a lot of time talking about value-added agriculture, 

and being able to have the country of origin on meat is being able 

to retrieve the value-added price; otherwise, you reward imported, 

lower-quality products that could be marketed at a higher price 

without an identification. 

Senator CHAMBLISS. Mr. Queen? 

Mr. QUEEN. Well, I do not think there is a cattle producer in 

America that would not approve some type of country-of-origin labeling. The law as we have it today that will soon be implemented 

is flawed, and to spend the money, if we cannot restructure this 

law the way it is intended to be spent today, is not a level playing 

field, certainly not for the beef industry. The purpose of this bill is 

to identify imported product into our country, aside from our domestic products here. Less than 8 percent of the imported product 

would be affected by this law. Also, other meat segments in our industry—and I was pleased to hear some of the panelists here in the 

chicken industry say earlier that they would like to have countryof-origin labeling. At this point they are not included in this country-of-origin labeling law. Food service is not included in this law, 

and how we segregate that, I am not sure, because, you know, 54 

percent of all the beef in the United States is served in the form 

of ground beef, and that is a blended commodity using imported 

product with our domestic product. 

So how we differentiate here, I am afraid if we do much differentiation, we are going to have a lot of marketplace disruption out 

there. We are going to create a non-safe attitude with our consumers, and it could set us back considerably if we do this. 

So a lot of issues have to be worked out, but, yes, if we can get 

this worked out, I do not think there is a cattleman alive that 

would not like a country-of-origin labeling law. 

Senator CHAMBLISS. Ms. Philippi? 

Ms. PHILIPPI. The pork industry supports voluntary country-oforigin labeling because we just think it is all cost and no benefit 

back to the producer, and because of the exclusions of poultry and 

the food service items, it just does not seem like it is a program 

that would be workable for us. 

Senator CHAMBLISS. Mr. Truex? 

45

Mr. TRUEX. The egg industry does not have a position on country-of-origin labeling, but I can assure you gentlemen that if you 

eat an egg in this country, there is a real high probability it was 

produced here. 

[Laughter.] 

Senator CHAMBLISS. Mr. Johnson? 

Mr. JOHNSON. Over 50 percent of the lamb that is consumed in 

the United States is imported, and a lot of that is being passed off 

as American lamb because American lamb is a better product. So 

we definitely are in favor of country-of-origin labeling. 

Senator CHAMBLISS. Mr. Roenigk? 

Mr. ROENIGK. As was mentioned, poultry is excluded from COOL 

at the moment. We are comfortable with that position. If there was 

reason to change, we would be willing to look at it. But with food 

service and prepared products excluded, imported product—the 

burden would fall on retail grocers. I am not sure that that would 

benefit what is trying to be done. 

I will leave it at that. 

Senator CHAMBLISS. Mr. Johnson, I really appreciate your comment relative to the European Union subsidies and import quotas 

issue. The problem we have had in our attempts to complete the 

Doha Round, is getting the attention of the Europeans relative to 

import quotas and import tariffs, as well as their subsidies, which 

are significantly higher than U.S. support programs. So I am 

pleased to hear you say that. 

Ms. Philippi is the only one to mention the South Korean Trade 

Agreement. I am actually meeting with the USTR this afternoon, 

and I am curious as to what the attitude of everybody else is relative to that agreement. I have got a feeling I know what the beef 

folks are going to say, but let me hear from you, Mr. Nelson. 

Mr. NELSON. Well, we definitely need to be able to get the beef 

channels open back to that country before we would look favorably 

on that trade agreement. 

Senator CHAMBLISS. Mr. Queen? 

Mr. QUEEN. Well, we at the National Cattlemen’s Association 

certainly would love to have a free trade agreement with South 

Korea, considering that they do have full trade of all U.S. beef at 

the time that free trade agreement comes forward. If we do not 

have that agreement in June, when it comes time for the President 

to sign onto this free trade agreement, we would certainly hope 

that this Congress would step forward and block this free trade 

agreement until we have full beef trade with South Korea. 

Senator CHAMBLISS. Anything else, Ms. Philippi, from you? 

Ms. PHILIPPI. The only thing I am going to add is it is one of the 

best agreements that has ever been put together for the pork industry, and we appreciate the effort that went into that. 

Senator CHAMBLISS. OK. Mr. Truex? 

Mr. TRUEX. The egg industry generally supports this agreement. 

Senator CHAMBLISS. Do we export eggs? 

Mr. TRUEX. Yes, sir. Currently this year we have exported more 

eggs than we have in the last 3 or 4 years. But we are very actively 

exporting eggs now. 

Senator CHAMBLISS. Who is our primary customer? 

46

Mr. TRUEX. I do not know that. We export through the U.S. Egg 

Marketers, and they do the dealing with those, and then the egg 

industry as a member of U.S. Egg Marketers ships our eggs 

through that system. 

Senator CHAMBLISS. OK. Mr. Johnson? 

Mr. JOHNSON. I just like to use the term ‘‘fair trade’’ instead of 

‘‘free trade.’’

Senator CHAMBLISS. Mr. Roenigk? 

Mr. ROENIGK. The Chicken Council supports a Korean agreement. We have issued a statement to that effect. Korea last year 

was our tenth largest poultry market. We think the agreement 

could move that on up in terms of importance. We look forward to 

that agreement getting passed, and there are a couple other ones 

that are ahead of that. We hope those get approved, too. 

Senator CHAMBLISS. Well, let me say I share the concern of Mr. 

Nelson and Mr. Queen relative to the beef issue. As I said in my 

public statement, I am losing patience with the Koreans. We have 

been very cooperative with them on the BSE issue, and I think it 

is really ridiculous that they have responded in the way they have, 

particularly with this agreement. And I think Senator Harkin and 

I share this concern, and we want to see this agreement come to 

fruition. It does look like it is a positive agreement. But we have 

got to have the free and open trade of U.S. beef going into Korea 

as a part of this agreement before we are going to be able to support it. And I am very hopeful that we are going to see that in the 

short term. 

Mr. Roenigk, you heard the previous testimony, I am sure, from 

Mr. Hamilton relative to these arbitration clauses in integrator 

contracts. What is your thought or position on that? 

Mr. ROENIGK. The question was asked of the previous panel 

whether or not they knew of a better mechanism, and I did not 

hear an answer to that question of a better mechanism. We are 

open to a better mechanism. We do not know one. We need something that is timely, efficient, and there are differences and we 

need to resolve those. Until someone comes up with a better idea, 

mandatory arbitration seems to be the best mechanism. 

Senator CHAMBLISS. Well, I am a little leery of opening up a can 

of worms on litigation even though I am a lawyer myself. I am still 

recovering from that. 

[Laughter] 

But arbitration sounds like a good alternative to litigation, but 

at the same time, if the current situation is not working right, as 

apparently it is not—because I hear this all the time from my poultry producers across Georgia—we need to either change the rules 

of the road in the current contracts, or some change needs to be 

made to give them more authority from a legal perspective. 

So I do not know what the answer is, but I would just urge you 

to take that message back to your industry because this will be up 

for discussion and I am sure probably some action as we move into 

the farm bill. 

Mr. ROENIGK. I will make sure that that message is delivered, 

and I will also assure you that we will come back to you with something in terms of a more concrete idea as to what might be an alternative. 

47

Senator CHAMBLISS. Good. Thank you, Mr. Chairman. 

Chairman HARKIN. Thank you, Senator Chambliss. 

I have no further questions. Again, I thank you all very much for 

your testimony, for being here today, and again, as we proceed on 

with the farm bill, if you have further thoughts, suggestions, advice, consultation, please let us know, on these or any other issues 

that we will be addressing in the farm bill. 

So, with that, thank you all very much, and the Committee will 

stand adjourned. 

[Whereupon, at 12:22 p.m., the Committee was adjourned.] 

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