```

[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

 
            HEARING TO REVIEW THE STATE OF THE BEEF INDUSTRY

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                     LIVESTOCK, DAIRY, AND POULTRY

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 6, 2011

                               __________

                            Serial No. 112-8

          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov

                  U.S. GOVERNMENT PRINTING OFFICE
66-068                    WASHINGTON : 2011
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, [email protected].  

                        COMMITTEE ON AGRICULTURE

                   FRANK D. LUCAS, Oklahoma, Chairman

BOB GOODLATTE, Virginia,             COLLIN C. PETERSON, Minnesota, 
    Vice Chairman                    Ranking Minority Member
TIMOTHY V. JOHNSON, Illinois         TIM HOLDEN, Pennsylvania
STEVE KING, Iowa                     MIKE McINTYRE, North Carolina
RANDY NEUGEBAUER, Texas              LEONARD L. BOSWELL, Iowa
K. MICHAEL CONAWAY, Texas            JOE BACA, California
JEFF FORTENBERRY, Nebraska           DENNIS A. CARDOZA, California
JEAN SCHMIDT, Ohio                   DAVID SCOTT, Georgia
GLENN THOMPSON, Pennsylvania         HENRY CUELLAR, Texas
THOMAS J. ROONEY, Florida            JIM COSTA, California
MARLIN A. STUTZMAN, Indiana          TIMOTHY J. WALZ, Minnesota
BOB GIBBS, Ohio                      KURT SCHRADER, Oregon
AUSTIN SCOTT, Georgia                LARRY KISSELL, North Carolina
STEPHEN LEE FINCHER, Tennessee       WILLIAM L. OWENS, New York
SCOTT R. TIPTON, Colorado            CHELLIE PINGREE, Maine
STEVE SOUTHERLAND II, Florida        JOE COURTNEY, Connecticut
ERIC A. ``RICK'' CRAWFORD, Arkansas  PETER WELCH, Vermont
MARTHA ROBY, Alabama                 MARCIA L. FUDGE, Ohio
TIM HUELSKAMP, Kansas                GREGORIO KILILI CAMACHO SABLAN, 
SCOTT DesJARLAIS, Tennessee          Northern Mariana Islands
RENEE L. ELLMERS, North Carolina     TERRI A. SEWELL, Alabama
CHRISTOPHER P. GIBSON, New York      JAMES P. McGOVERN, Massachusetts
RANDY HULTGREN, Illinois
VICKY HARTZLER, Missouri
ROBERT T. SCHILLING, Illinois
REID J. RIBBLE, Wisconsin

                                 ______

                           Professional Staff

                      Nicole Scott, Staff Director

                     Kevin J. Kramp, Chief Counsel

                 Tamara Hinton, Communications Director

                Robert L. Larew, Minority Staff Director

                                 ______

             Subcommittee on Livestock, Dairy, and Poultry

                  THOMAS J. ROONEY, Florida, Chairman

BOB GOODLATTE, Virginia              DENNIS A. CARDOZA, California,  
STEVE KING, Iowa                     Ranking Minority Member
RANDY NEUGEBAUER, Texas              DAVID SCOTT, Georgia
K. MICHAEL CONAWAY, Texas            JOE COURTNEY, Connecticut
STEPHEN LEE FINCHER, Tennessee       TIM HOLDEN, Pennsylvania
TIM HUELSKAMP, Kansas                LEONARD L. BOSWELL, Iowa
SCOTT DesJARLAIS, Tennessee          JOE BACA, California
CHRISTOPHER P. GIBSON, New York      KURT SCHRADER, Oregon
REID J. RIBBLE, Wisconsin            WILLIAM L. OWENS, New York

              Michelle Weber, Subcommittee Staff Director

                                  (ii)

                             C O N T E N T S

                              ----------                              
                                                                   Page
Boswell, Hon. Leonard L., a Representative in Congress from Iowa, 
  submitted resolution...........................................    37
Cardoza, Hon. Dennis A., a Representative in Congress from 
  California, opening statement..................................     2
Rooney, Hon. Thomas J., a Representative in Congress from 
  Florida, opening statement.....................................     1
    Prepared statement...........................................     2

                               Witnesses

Strickland, James A. ``Jim'', President, Florida Cattlemen's 
  Association; Member, National Cattlemen's Beef Association; 
  Owner, Strickland Ranch, Myakka City, FL.......................     3
    Prepared statement...........................................     5
Burkholder, Anne G., Vice Chairman, Cattle Health and Wellbeing 
  Committee, National Cattlemen's Beef Association; Owner, Will 
  Feed, Inc., Cozad, NE..........................................    10
    Prepared statement...........................................    12
Bull, Kenneth, Vice President for Cattle Procurement, Cargill, 
  Wichita, KS....................................................    19
    Prepared statement...........................................    21

            HEARING TO REVIEW THE STATE OF THE BEEF INDUSTRY

                              ----------                              

                        WEDNESDAY, APRIL 6, 2011

                  House of Representatives,
     Subcommittee on Livestock, Dairy, and Poultry,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 9:34 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Thomas 
J. Rooney [Chairman of the Subcommittee] presiding.
    Members present: Representatives Rooney, Goodlatte, King, 
Neugebauer, Conaway, DesJarlais, Gibson, Cardoza, Scott, and 
Holden.
    Staff present: Patricia Barr, John Goldberg, Tamara Hinton, 
John Konya, Debbie Smith, Pete Thomson, Michelle Weber, Nathan 
Fretz, Liz Friedlander, Mary Knigge, Robert L. Larew, and Jamie 
Mitchell.

OPENING STATEMENT OF HON. THOMAS J. ROONEY, A REPRESENTATIVE IN 
                     CONGRESS FROM FLORIDA

    The Chairman. This hearing on the Subcommittee on 
Livestock, Dairy, and Poultry to review the state of the beef 
industry will come to order.
    I would like to thank my Ranking Member, Mr. Cardoza, for 
working with us in preparing this hearing today. I would also 
like to welcome our witnesses and thank them for taking the 
time out of their busy lives to participate in this process. I 
would also like to thank Mr. Scott for joining us today, and I 
look forward to his comments and questions as well.
    Today's hearing is structured to provide an overview of our 
nation's modern beef production sector. We have tried to span 
the range of this complex business in a brief hearing with 
three witnesses who represent a cow-calf operation in my home 
State of Florida, a family-owned 6,000 head feeding business in 
Nebraska, and a large beef packer headquartered in Kansas.
    I learned an interesting fact recently. The United States 
domestic cattle herd represents seven percent of the global 
inventory while producing 20 percent of the global beef supply. 
Clearly, our constituents are doing amazing work in the beef 
sector.
    Our witnesses have been asked to provide a description of 
the beef production system from their perspective, discuss the 
economic situation as they see it today, and list some of our 
public policy challenges. This hearing and those in the 
planning stages for other sectors is intended to lay the 
foundation for the work of the Livestock, Dairy, and Poultry 
Subcommittee.
    The animal agriculture industry is very complex, and the 
issues of importance are numerous. We hope these initial 
hearings will provide our Subcommittee with the frame of 
reference and perspective that will guide our work throughout 
this Congress.
    As the session proceeds we will wade into more topics in 
greater detail, and I appreciate the interest and the input of 
my colleagues regarding these matters. I will continue to 
welcome and encourage everyone to offer suggestions as we move 
forward with our Subcommittee's agenda.
    [The prepared statement of Mr. Rooney follows:]

   Prepared Statement of Hon. Thomas J. Rooney, a Representative in 
                         Congress from Florida

    I would like to thank my Ranking Member, Mr. Cardoza, for working 
with us in preparing for this hearing today. I would also like to 
welcome our witnesses and thank them for taking time out of their busy 
lives to participate in this process.
    Today's hearing is structured to provide an overview of our 
nation's modern beef production sector. We have tried to span the range 
of this complex business in a brief hearing with three witnesses, who 
represent a cow-calf operation in my home State of Florida; a family-
owned, 6,000 head feeding business in Nebraska; and a large beef packer 
headquartered in Kansas.
    I learned an interesting fact recently: the United States domestic 
cattle herd represents seven percent of the global inventory, while 
producing 20 percent of the global beef supply. Clearly, our 
constituents are doing amazing work in the beef sector.
    Our witnesses have been asked to provide a description of the beef 
production system from their perspective, discuss the economic 
situation as they see it today, and list some of their public policy 
challenges.
    This hearing, and those in the planning stages for other sectors, 
is intended to lay the foundation for the work of the Livestock, Dairy, 
and Poultry Subcommittee. The animal agriculture industry is very 
complex and the issues of importance are numerous. We hope these 
initial hearings will provide our Subcommittee with a frame of 
reference and perspective that will guide our work throughout this 
Congress.
    As the session proceeds, we will wade into more topics in greater 
detail. I appreciate the interest and input of my colleagues regarding 
these matters. I will continue to welcome and encourage everyone to 
offer suggestions as we move forward with our Subcommittee's agenda.

    The Chairman. I would now like to recognize Ranking Member 
Cardoza for his opening statement.

 OPENING STATEMENT OF HON. DENNIS A. CARDOZA, A REPRESENTATIVE 
                  IN CONGRESS FROM CALIFORNIA

    Mr. Cardoza. Thank you, Mr. Chairman, and thank you for 
having this hearing today. Thank you to our witnesses for 
taking time out of your busy schedules and sharing with us your 
experiences in the industry.
    If we watch the news and read the headlines, we would 
believe that all of agriculture is flying high these days. 
However, those of us who grew up in farming communities 
understand the inner workings of the industry and know that 
each commodity is different. That is why I am very happy to 
hold this hearing and participate in this hearing today to 
discuss beef production, the trends in the industry and the 
problems this Committee should focus on as we move forward.
    In California, we have seen volatile prices and increased 
input costs. This trend is disturbing, but numbers alone do not 
tell the whole story. Through successful farm bill programs 
like EQIP and Water Conservation Fund, cattlemen in California 
and across the country have worked tremendously hard to 
conserve water, protect our land, and improve our air quality 
while also feeding the families of America and the world.
    We as a Committee have a responsibility to promote policies 
that will keep the industries alive and thriving. A healthy 
beef industry not only puts affordable food on our table, it 
provides good jobs for our workers and strengthens national 
security by making us less dependent on other countries for our 
food supply. Nonetheless, in this tight budget climate we need 
to prioritize programs that are economically and efficiently 
working for our farmers. We need to focus our resources on 
initiatives that best help our cattlemen and the beef industry 
as a whole.
    I look forward to hearing from our witnesses today about 
what is and what is not working. Thank you again for being here 
with us.
    The Chairman. Thank you, Mr. Cardoza. The chair would 
request that other Members submit their opening statements for 
the record so the witnesses may begin their testimony and 
ensure that there is ample time for questions.
    I would like to welcome our panel of witnesses to the 
table, and it is, from left to right, Mr. Jim Strickland, Owner 
of Strickland Ranch, on behalf of the Florida Cattlemen's 
Association, Myakka City, Florida; Ms. Anne Burkholder, Owner, 
Will Feed, Inc., on behalf of the National Cattlemen's Beef 
Association in Cozad, Nebraska; and Mr. Ken Bull, Vice 
President for Cattle Procurement, Cargill, Wichita, Kansas.
    We will begin with Mr. Strickland. Mr. Strickland, please 
begin when you are ready.

 STATEMENT OF JAMES A. ``JIM'' STRICKLAND, PRESIDENT, FLORIDA 
  CATTLEMEN'S ASSOCIATION; MEMBER, NATIONAL CATTLEMEN'S BEEF 
     ASSOCIATION; OWNER, STRICKLAND RANCH, MYAKKA CITY, FL

    Mr. Strickland. Good morning. Mr. Chairman and Ranking 
Member Cardoza, my name is Jim Strickland and I am President of 
the Florida Cattlemen's Association and I am pleased to be here 
with you.
    I raise cattle as a family business, but being a small 
producer does not mean my business is simple. In addition to 
managing my herd, I must manage land, water, and other 
resources. I compete in foreign and domestic markets. Like all 
other producers, I have to care for the health of my cattle and 
deal with weather extremes. Additionally, because I focus on 
producing pedigree cattle, some sold for breeding rather than 
harvest, I also concern myself with genetics.
    I care about the environment. My business depends on clean 
air, clean water, and clean country and healthy stock. Right 
now, the EPA is in the process of reviewing its National 
Ambient Air Quality Standards for coarse particulate matter, 
more commonly called dust. With their track record, EPA's 
promise of not regulating rural dust gives us in rural America 
no comfort. Making this standard twice as strict will put 
entire regions of this nation's agriculture production in 
violation of the standard, at a time when we are supposed to be 
feeding a growing world population.
    Preventing farming and ranching activities because we kick 
up too much dust goes against all logic. EPA's numeric nutrient 
criteria restrictions in my home State of Florida strike me and 
many others as being based on dubious background data and their 
impact on water quality is unproven.
    One element is not debatable, and that is some farmers and 
ranchers will be forced off the land. Another challenge that I 
have in just keeping my operation whole, most of my worth is in 
land, land that is necessary to what I do to earn my living. It 
is not readily divisible and is far from liquid. If I sell off 
a chunk of my ranch for any reason, my economic model falls 
apart.
    My son is in the Army and is in a combat zone as we speak. 
I do not know if he will stay in the Army or if he will choose 
to follow me into the cattle business or not, but I want him to 
have that option. In order to do that, a permanent end to the 
estate tax is required, but if you cannot find a way to do 
that, please find some kind of exemption for those of us that 
work the land.
    Even with these challenges, there are still opportunities. 
I raise cattle, but my business is selling beef. Like most of 
my fellow ranchers and fellow competitors, I must be in tune 
with what the consumers want to see in the meat case at their 
local market. By recognizing the importance of consumer 
preferences, cattle producers have created innovative marketing 
programs, improved the quality of beef, and given the consumer 
what he or she wants. In the old days, all cattle in a pen were 
auctioned off for the same average price. Cattlemen had no 
incentive to produce a value-added product. Why invest to 
produce a higher quality steak when you receive no more for a 
quality steer than the next man gets for an animal of lesser 
quality?
    Participating in marketing arrangements brings other 
benefits. Most importantly, we have the best price risk tools 
ever. The path from calf to porterhouse is strewn with 
opportunities to lose money. Forward contracting contracts 
permit me to shift some of the risk to others, but these 
opportunities are at risk due to the proposed GIPSA rule which 
I oppose. Under existing law, you must show that a packer or 
processor harmed the market by engaging in illegal actions such 
as collusion, price fixing, et cetera. This is known as showing 
competitive injury. Under the new definitions included in the 
proposed rule, competitive injury and the likelihood of 
competitive injury are redefined and made so broad that mere 
accusations without economic proof will suffice for USDA or an 
individual to bring a lawsuit against a buyer, packer, or 
processor.
    Anyone who has ever raised a child or listened to 
schoolyard bickering knows that fair is an elastic term. The 
rules of eight U.S. circuit courts have upheld the need to show 
competitive injury to the market before you can sue. Do we want 
to throw out these? The best thing Congress can do to ensure a 
fair and competitive beef industry is use its oversight power 
to see that the laws on the books are uniformly and carefully 
enforced, and that is not the case today.
    The failure of Eastern Livestock Company last fall left 
ranchers and livestock auction barns holding the bag on more 
than $130 million in bad checks. Hundreds were affected, and 
several cattle operations may yet go under. This might have 
been avoided, had GIPSA been faithfully executing a statutory 
responsibility to audit and oversee the Eastern situation.
    While it is an honor to be here today representing United 
States cattlemen and women, I would rather be home with my wife 
raising cattle. I appreciate your invitation. It is my duty to 
be here and give voice to these policy discussions, and I thank 
all of you for your service to our country, and for your time 
and consideration.
    [The prepared statement of Mr. Strickland follows:]

 Prepared Statement of James A. ``Jim'' Strickland, President, Florida
Cattlemen's Association; Member, National Cattlemen's Beef Association; 
                Owner, Strickland Ranch, Myakka City, FL

    Mr. Chairman, Ranking Member Cardoza, and Members of the 
Subcommittee, my name is Jim Strickland. I am President of the Florida 
Cattlemen's Association and am pleased to be with you today.
    America's cattle producers range from giant operations to very 
small family ranches where producers raise cattle to supplement their 
income from a wage paying job. I raise cattle as a family business. I 
do a few other things but like the vast majority of other producers in 
the United States, I am a small producer.
    However, let me be clear. Being a small producer does not mean my 
business is simple. In addition to managing my herd, I must manage 
land, water and other resources. I compete in foreign and domestic 
markets. Like all other producers, I have to care for the health of my 
cattle and deal with weather extremes. Additionally, because I focus on 
producing pedigreed cattle, some sold for breeding rather than 
slaughter, I also concern myself with genetics.
    In addition to all of this, I spend a lot of my time thinking about 
government, laws, and regulation. I do not do this because I am a 
political philosopher but because government at all levels--in this 
country and abroad--has created a multitude of rules that affect the 
way I do business.
    But I am not here to engage in a diatribe about ``big government'' 
or to push a partisan or ideological agenda.
    I know enough American history, to know that many regulations are 
enacted for excellent reasons--healthier food products, cleaner water, 
fighting rapacious business practices and more. I know that business 
practices change and that new laws and regulations are sometimes needed 
to ward off new ills.
    With these cautions voiced, I must say over the past century, we 
have seen far more regulations and laws added than taken off. We have 
learned that laws and regulations have unintended consequences and that 
they can introduce wasteful habits that benefit few and harm many.
    With that off my chest, here are my personal views on some of the 
government-related issues I face in my business.

Conservation and the Environment
    Let me begin by stating that cattlemen who knowingly and willfully 
violate the Clear Air and Clean Water Acts should be prosecuted. These 
criminals gain unfair advantage in their competition with honest 
producers and degrade life for all.
    I care about the environment. My business depends on clean air, 
clean water, clean ground and healthy stock. I admire and respect the 
professionals at the Environmental Protection Agency (EPA). They have 
an extremely complicated job as they try to understand the nearly 
infinite interrelationships of the ecosystems upon which all of us 
depend. Even so, I think they often overreach on evidence that does not 
meet the test of clear and accepted scientific standards. Their actions 
damage producers without evidence of benefit to the environment or 
public well-being. The cumulative effect is to force agricultural 
producers out of the business with little corresponding benefit.
    Right now, the EPA is in the process of reviewing its National 
Ambient Air Quality Standards for coarse particulate matter, more 
commonly called dust.
    I would like to clear some things up related to the review of EPA's 
dust standard First, EPA claims they are not and have no intention of 
regulating dust. Unfortunately, dust is already regulated under the 
current coarse particulate matter standard. Therefore they are already 
regulating farm dust but at a level that, while challenging, is 
manageable. Second, while EPA has not officially proposed a lower 
standard, farmers and ranchers can see the writing on the wall. Under 
the current ``review'' of the dust standard, EPA's staff recommended to 
Administrator Lisa Jackson that she could either keep the standard the 
way it is, or make it twice as stringent. With their track record, 
EPA's promise of not regulating rural dust gives us in rural America no 
comfort. Lastly, making this standard twice as strict will put entire 
regions of this nation's agricultural production in violation of the 
standard. At a time when we are supposed to feed a growing world 
population, preventing farming and ranching activities because we kick 
up too much dust goes against all logic.
    The total maximum daily load (TMDL) action surrounding the 
Chesapeake Bay and the numeric nutrient criteria restrictions in my 
home state of Florida strike me and many others as being based on 
dubious background data. Their impact on water quality is unproven. One 
element is not debatable, however, is that these actions will have 
severe, negative effects on production agriculture in the affected 
areas. Some farmers and ranchers will even be forced off the land. 
Taking some land out of agricultural production will eventually 
increase pressure to change land use regulations to permit more 
residential and industrial development around the shores of the 
Chesapeake and the beaches of Florida. The EPA says these water issues 
affect a limited area, but experience and intuition tell me that they 
are likely to spread to other watersheds across the country.
    All of us, especially those in charge of protecting the 
environment, must recognize that human beings and civilization change 
the environment. Before Columbus, there were no cattle in this 
hemisphere. The Great Plains had never been plowed. No reasonable 
person wants to unwind these changes. Our challenge is to manage these 
changes with a reasoned, scientific approach that proceeds in a manner 
that affords adequate protections without destroying productivity.

Trade
    International trade in cattle began long before the United States 
of America. The ancestors of the Devon Red cattle George Washington 
raised were imported to what became the United States about 100 years 
before he was born.
    American cattlemen have always been strong believers in 
international trade. We support aggressive negotiating positions to 
open markets and to remove spurious ``health regulations'' and other 
trade barriers intended to keep our products out of foreign markets. As 
you are aware, we continue to fight to recover the market share we once 
had in many countries, including Korea, China and Japan. We ask that 
you continue to help us by ending pseudo-scientific trade barriers 
designed to exclude us from foreign markets. International trade is 
vital to the sustainability of the U.S. cattle industry. We must look 
to the 96 percent of the world population outside our borders as 
markets for our products. We applaud and encourage the Subcommittee's 
continued oversight of the enforcement of any trade pact to which 
American agriculture is a party. And we ask that you fight to pass of 
the South Korea, Panama and Colombia trade agreements.

Research
    Research in new production methods, nutrition and animal diseases 
is an important part of Federal agricultural policy. The U.S. 
Department of Agriculture's (USDA) research is critical in all aspects 
of our business. The research and extension activities help identify 
new cattle production methods that make our business safer and more 
efficient. Animal health research aids in the control and eradication 
of animal diseases, prevents intrusion of foreign animal diseases and 
helps to preempt new diseases. These activities keep our national herd 
healthy and enhance the export of our beef and cattle. Nutrition 
research validates that lean beef plays a critical role in a well-
balanced, nutrient-dense diet.
    I want to emphasize the importance of USDA's Agricultural Research 
Service (ARS) centers in all regions of the country. I was very 
dismayed recently to learn of the possible closure of the Sub-Tropical 
Agricultural Research Station in Brooksville, Fla., which is one of 
only three ARS Beef Cattle Research Stations in the country. The other 
two are located in Nebraska and Montana. The work of the Florida center 
cannot be replicated or replaced by the other two centers because of 
the vast differences in cattle genotypes, soil types and unique 
environments. The Brooksville center has the potential to impact nearly 
\1/3\ of the beef cow population in the nation. It seems very unwise to 
shut down this important part of the national animal research 
infrastructure.
    Additionally, I would reiterate that the collaborative research 
USDA's ARS conducts cooperatively with the nation's land grant 
universities is vital to the future of the cattle industry, the 
environment and safety of the food supply. The combination of research, 
teaching and extension must be maintained as America assumes a growing 
role in feeding a rapidly growing global population.

Energy
    I live and die by the market. President John F. Kennedy once said 
agricultural producers are the only people in our country who ``have to 
buy at retail, sell at wholesale and pay the freight both ways.''
    That makes the economics of raising cattle a tough balancing act. 
However, what is already tough is made worse by a government's thumb on 
the scale. I am speaking of laws and policies that subsidize corn-based 
ethanol production. When I buy a bushel of corn, I am competing against 
someone whose purchase is subsidized by my tax dollars.
    I understand why soaring oil prices, dependable energy supplies, 
and other factors caused our national experiment with subsidizing 
ethanol. But 30+ years and more than $30 billion of subsidies have 
failed to create a self-sustaining economic model for ethanol. After 
30+ years of rising oil prices and increasing oil imports, we can say 
the experiment failed.
    An August 2009 U.S. Government Accountability Office report titled 
``Biofuels--Potential Effects and Challenges of Required Increases in 
Production and Use'' is evidence that the corn-based ethanol industry 
is mature and that the VEETC should be allowed to expire. According to 
the report, ``the VEETC's annual cost to the Treasury in forgone 
revenues could grow from $4 billion in 2008 to nearly $7 billion in 
2015 for conventional corn starch ethanol.''
    The USDA's Economic Research Service release a report in 2008 that 
reported feed costs for livestock, poultry and dairy reached a record 
high of $45.2 billion--an increase of more than $7 billion over 2007 
costs. Further, a September 2008 Congressional Research Service report 
stated that the dramatic increase in livestock production costs was 
attributed to feed. The cattle feeding sector has lost $7 billion in 
equity from December 2007 to February 2010 because of high feed costs 
and economic factors that have negatively affected beef demand.
    I have two specific requests on ethanol:

    1. Let corn-based ethanol compete on the same terms I do. If 
        ethanol producers can make money without a subsidy paid with my 
        tax dollars, I will be happy for them.

    2. Oppose the Volumetric Ethanol Excise Tax Credit (VEETC) and the 
        tariff on imported ethanol.

Taxes
    I know both sides of the estate tax debate. I do not claim to be 
comfortable with billionaires passing vast wealth through generations 
untold. But as a rancher, I have issues that do not apply to 
financiers, bankers, real estate magnates, oil producers or software 
geniuses.
    Most of my worth is in land--land that is necessary to what I do to 
earn my living. It is not readily divisible and is far from liquid. I 
am not a land speculator and while I try to behave in a gentlemanly 
fashion, I am no gentleman farmer. If my heirs or I sell off a chunk of 
my ranch for any reason, my economic model falls apart.
    My son is in the Army and is in a combat zone right now. I do not 
know if he will stay in the Army or if he will choose to follow me into 
the cattle business or not, but I want him to have that option.
    A permanent end to the estate tax is the simplest way to resolve 
the matter, but if you cannot find a way to do that, please find some 
kind of exemption for land that is worked by its owners. According to 
USDA, the death tax is one of the leading causes of the breakup of 
multi-generational family operations. Agricultural production in 
America is heavily dependent on inheritance, but the death tax makes it 
difficult and in some cases impossible for a farmer or rancher to pass 
his land on to the next generation.

Transportation
    A safe and efficient transportation system is an important 
component of cattle ranching in Florida and the rest of the East. We 
raise our cattle and then ship many of them to the feedlots in Kansas, 
Oklahoma and Texas. Of course, trucks and fuel to move them are part of 
our cost. To make things worse, the animals lose weight and ``shrink'' 
in transit. This is tough when you sell by the pound. We ask that you 
support an increase in trailer weights, with the addition of a third 
axle. We especially ask that you move to standardize these weight 
limits across state lines. The current patchwork requires circuitous 
routes as we move to our markets.

Marketing Issues
    Beef producers embrace free markets. The cyclical ups and downs of 
the market can be harsh, but the system works. We remain steadfastly 
committed to a competitive market system.
    Those who implement policies that set prices, underwrite 
inefficient production, or manipulate domestic supply and demand 
readily cite supposed benefits. But a review of economic history 
suggests that government distortions of the market far too often throw 
the economic balance wheels out of kilter.
    Marketing cattle has grown very complex. Market factors from energy 
costs, consumer preferences, feed costs and many others have ended the 
old system of raising what you can and hoping for good prices when your 
animals hit the market. Most of the cattlemen who thought they were in 
the business of raising cattle and praying for decent prices have gone 
broke.
    I raise cattle, but my business is selling beef. Like most of my 
fellow ranchers (and fellow competitors), I must be in tune with what 
the consumers want to see in the meat case at their local market. By 
recognizing the importance of consumer preferences, cattle producers 
have created innovative marketing programs, improved the quality of 
beef and given the consumer he or she wants. We have also become more 
profitable and efficient. Some of these innovations have come in the 
form of alternative marketing arrangements (AMAs) such as forward 
contracting, marketing alliances and packer ownership. These 
arrangements offer me a better opportunity to be compensated for the 
value I add to my animals.
    In the old days, all cattle in a pen were auctioned for the same 
average price. Cattlemen had no incentive to produce higher quality 
beef. Why invest to produce a leaner steak when you receive no more for 
a quality steer than the next guy gets for a four-legged bundle of fat 
and gristle?
    As our industry struggled through decreasing demand in the 1970s, 
1980s and early 1990s, the government was not pushing us toward leaner, 
more consistent beef. Producers, including myself, began to overhaul 
our practices so we could produce high quality lean beef. I invested in 
genetics, management and herd health to meet the demand some of us had 
begun to recognize.
    I paid for my investment by demanding a premium price for my 
premium product. Meeting this demand for a premium product has produced 
the current system of value-based marketing, a system with a multitude 
of premiums, discounts, grids, contracts, formulas, and alliances that 
have become commonplace in the beef industry. You recognize some of the 
many names given to premium products:

   Certified Angus Beef.

   U.S. Premium Beef, Ltd.

   Ranchers' Renaissance.

   Harris Ranch.

    These are just a few of the innovative marketing programs 
available. Many of our country's ranchers have chosen to participate in 
one program or another in order to become more competitive in a market 
controlled by consumers. These arrangements are led by producers but 
driven by markets and consumers. There are many more, particularly in 
areas where producers are teaming with other segments of the industry 
to take advantage of national, regional, and even niche market 
opportunities ranging from breed or genetics programs to natural and 
organic production. Process and source-verified programs use electronic 
identification of animals and this, in turn, leads to efficient 
production of healthy animals yielding beef for which consumers are 
willingly paying a premium.
    Participating in these marketing arrangements brings other 
benefits. Most importantly, we have the best price risk tools ever. 
Price or market risk is not avoidable. The path from calf to 
porterhouse is strewn with opportunities to lose money. Forward 
contracting permits me to shift some of the risk to others. In return 
for a guaranteed price, I forfeit some opportunity for outsized 
profits. I am happy to do it. If I know the price I am going to receive 
down the road, I can plan and operate more efficiently. Instead of 
fretting over what live cattle will be worth in several months, I can 
focus on day-to-day operations and herd improvement. Whoever buys my 
future delivery is protected against a spike in prices and the buyer 
too appreciates the stability. Furthermore, these contracts are 
voluntary. If I do not like the offering price, I can walk away and 
find another buyer, either now or later.
    All these changes ease financial operations. Ranchers who need 
operating capital get a much friendlier reception from their banker 
when they can show evidence of a marketing plan and a firm price for 
their product.
    These webs of marketing arrangements are sometimes complex, but 
they bring efficiency. Feedlots can report how cattle perform when 
being fed. Packers can report yield and quality. And I use this 
``actionable intelligence'' to manage my herd.
    This not smoke and mirrors. The benefits have been demonstrated. In 
2007, USDA's Grain Inspection Packers and Stockyards Administration's 
(GIPSA) Livestock and Meat Marketing Agency released a government-
funded, 3.5 year study based on more than 500,000 transactions 
representing more than 58 million head of cattle. According to the 
study, producers participate in alternative marketing arrangements to 
buy or sell higher quality cattle, improve supply chain management and 
obtain better prices.
    The study demonstrates that a market-driven system works. The 
study's overwhelming conclusion is that overall alternative marketing 
arrangements help all sectors of the industry.
    Auction markets are also a critically important part of the U.S. 
cattle industry. They have been the primary arena for marketing cattle 
for more than 100 years. In this marketing method, a willing seller 
takes the highest bid for his cattle when he decides it is the right 
time to bring them to the auction barn. Ranchers who market this way 
cite several reasons for their choice. One reason is independence. By 
using the cash or spot market, producers have no restrictions or cattle 
quality concerns that would keep them from selling your cattle--unlike 
marketing arrangements that require certain criteria be met before 
cattle qualify for filling the contract. Flexibility is also important 
to these producers. Selling on the spot market gives ranchers the 
opportunity to participate in market rallies. Those who have already 
contracted their cattle lose that opportunity because they are locked 
into a price agreement.
    Even with traditional means of marketing, we have seen innovations 
and improvements 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 customers in other parts of the 
country and even in other countries. This style of spot market stemmed 
once again from ranchers who produce a higher quality product and want 
to make sure they are getting paid for the value they are adding to 
their cattle.
    The GIPSA study concluded that reductions or restrictions on AMAs 
would cause a decrease in the supply of cattle, a decrease in the 
supply and quality of beef and an increase in retail beef prices.
    Who needs that?
    Given the results of this study, I have no idea why GIPSA is 
proposing its competition rule, which is a rule I oppose.
    This rule goes beyond the intent of Congress in the 2008 Farm Bill 
and proposes major changes to the Packers and Stockyards Act (PSA) that 
will damage our ability to market cattle.
    Under existing law, you must show that a packer or processor harmed 
the market by engaging in illegal actions such as collusion, price 
fixing, etc. This is known as showing ``competitive injury.'' Under the 
new definitions included in the proposed rule, ``competitive injury'' 
and ``likelihood of competitive injury'' are re-defined and made so 
broad that mere accusations, without economic proof, will suffice for 
USDA or an individual to bring a lawsuit against a buyer (packer or 
processor). In this case, a producer need only say that he was treated 
``unfairly'' to sue a packer or processor. There is no definition of 
what ``fair'' should be. Anyone has ever raised a child or listened to 
school yard bickering knows that ``fair'' is an elastic term. The 
rulings of eight U.S. Circuit Courts have upheld the need to show 
competitive injury to the market before you can sue. Do we need to 
throw these well-defined rules out the window and watch for a decade or 
more as our courts attempt to sort out what ``fair'' means?
    Under the proposed rule, order buyers will only be able to 
represent one packer. It is at quite possible that the loss of 
efficiency from requiring a single buyer for multiple packers will end 
up hurting producers like me. I do not envision packers flooding 
livestock barns with exclusive buyers. In fact, I see some barns having 
no buyers at all.
    The best thing Congress can do to ensure a fair and competitive 
beef industry is to use its oversight power to see to it that the laws 
on the books are uniformly and carefully enforced.
    That is not the case today.
    The failure of Eastern Livestock Company last fall left ranchers 
and livestock auction barns holding the bag on more than $130 million 
in bad checks. Hundreds were affected and several cattle operations may 
yet go under. This might have been avoided had GIPSA been faithfully 
executing its statutory responsibility to audit and oversee Eastern.
    If we need legislative or regulatory action in the beef industry, 
it is a need to faithfully execute existing laws and regulations. If 
GIPSA and USDA need more money to enforce the PSA, I ask that you give 
to them. But please ensure they improve their current performance 
before letting them take on dubious new responsibilities and 
authorities.
    As a member of the National Cattleman's Beef Association, I support 
NCBA's position in favor of a free market system with reasonable 
regulation. We trust the American ranchers' ability, adaptability and 
innovative skills over those of well-intentioned regulators.
    Make no mistake. I rely on Federal regulators to ensure that the 
marketplace is free from monopolies, collusion, price fixing and other 
illegal activities. But I am worried that current plans will poke a 
stick in the wheels of commerce and destroy a productive system that 
has benefited everyone.
    Like other business operators, cattle producers want access to 
business opportunities and higher profits. We believe we have them now 
and proposed regulations with reduce them. That is why I ask that you 
recall that for every agreement made by a packer; on the other side of 
the deal is an individual rancher or feeder who has decided that the 
agreement is in his or her best interest. That opportunity will help to 
continually improve their herd management, genetics and long-term 
profitability. The opportunity to engage in and benefit from new 
advances is good for the individual producer and good for the industry 
as we strive to supply the consumer with beef products they demand.

Conclusion
    This is not fun for me. By temperament and practice, I would rather 
buy, sell and especially raise cattle than come here to testify. I have 
come here not in furtherance of some partisan or ideological agenda. I 
accepted your invitation because I thought it my duty to participate in 
public policy discussions and to give voice to the concerns I share 
with most of my fellow ranchers.
    I thank you for your service to our country and for your time and 
attention.
    I welcome any questions you might have.

    The Chairman. Well, thank you for your service as well.
    We will move on now to Ms. Burkholder. Go ahead.

        STATEMENT OF ANNE G. BURKHOLDER, VICE CHAIRMAN,
  CATTLE HEALTH AND WELLBEING COMMITTEE, NATIONAL CATTLEMEN'S 
      BEEF ASSOCIATION; OWNER, WILL FEED, INC., COZAD, NE

    Ms. Burkholder. Good morning, Mr. Chairman, Ranking Member 
Cardoza. My name is Anne Burkholder. I am a cattle feeder from 
Cozad, Nebraska. I am an American, a wife, a mother, and a 
cattle feeder. I care for and raise animals that will be 
harvested to feed to my family, your family, and families all 
over the world.
    I spent the majority of my life only being a consumer of 
beef. It is only in the last 14 years that I have been actively 
involved in the production of beef. I am a native of West Palm 
Beach, Florida, and like many of my fellow consumers, grew up 
with no direct ties to production agriculture. My husband and I 
met while studying at Dartmouth College, and following 
graduation, we returned to central Nebraska to be the third 
generation to work on his family's diversified farm. Shortly 
after our return to Nebraska, my father-in-law decided to sell 
the cattle feedyard. I asked him to keep it and to allow me the 
chance to learn how to manage it.
    Today I am the proud owner and manager of Will Feed 
Incorporated, the feedyard that finishes approximately 5,500 
cattle annually. The first week at the feedyard I learned an 
exceptionally important lesson: never to judge a group of 
people or an industry without gaining an educated understanding 
of exactly what you are judging. I may have had a degree from 
Dartmouth, but I didn't know a thing about the cattle business. 
My father-in-law took a chance on me and allowed me to learn at 
the feedyard.
    Living on a farm, caring for animals and growing food is 
something that is very difficult to understand from the outside 
looking in. It cannot only be learned from a textbook because 
Mother Nature is our single largest challenger, and she is very 
unpredictable.
    I am in the business of caring for animals that raise beef, 
and my top two priorities are animal care and food safety. The 
feedyard that I manage today does not look the same as it did 
when it was built in the early 1970s. It is not managed the 
same way, either. Our farm continues to evolve in order to 
provide better care for our animals and a safe, high quality 
beef product for all consumers to enjoy, all while continuing 
to protect the environment.
    Cattle producers are the first line of defense in 
protecting the land, the environment, our natural resources. 
Unfortunately, EPA is plowing down a path of burdensome 
regulations that do not have the science to support them. 
Current proposed coarse dust regulations, twice as strict, 
would put regions like mine in violation of the standard. More 
importantly, EPA's charge under the Clean Air Act is to protect 
public health, and there is no scientific evidence that farm or 
ag dust has adverse effects on public health.
    Healthy cattle are not only the foundation of a safe food 
supply, but they are the foundation of the beef industry. To 
keep cattle healthy, producers utilize important tools like 
vaccines, antibiotics, good nutrition programs and herd 
management practices. Prevention of disease is a cornerstone in 
both animal and human medicine. This allows us to provide a 
higher quality of life to our cattle while keeping our food 
supply safe. We utilize a holistic care program at the feedyard 
which focuses on comprehensive animal health, and is based on 
the understanding of a prey animal, his thoughts and his 
behavior.
    Cattlemen fully support an open, free, and competitive 
marketplace. Over the past 10 years, I have worked hard to 
develop a niche for my relatively small cattle feedyard. I have 
established relationships with a group of cow-calf producers 
who want to follow the performance of their calves from birth 
to harvest. For this to be economically feasible for both the 
cow-calf producer and me, the calves that we produce must be 
able to bring a premium over the commodity calf. In addition, 
it is necessary for me to have an alternative marketing 
arrangement that allows me to collect carcass data so that we 
can continually improve the cattle that we ship to harvest.
    I participate in an AMA with U.S. Premium Beef and also 
work with certified Angus beef, as well as forward contracting. 
Many other cattlemen and I have made the choice to participate 
in a program that will offer us an opportunity for a larger 
share of the consumer's dollar, while managing market risk and 
volatility.
    I adamantly oppose the proposed GIPSA rule for several 
reasons. Specifically, the rule bans packer-to-packer sales of 
livestock. This applies to individual packers and any 
affiliates or subsidiaries that they may own. Since I own stock 
in U.S. Premium Beef, am I then considered a packer? If so, 
then I would be limited to marketing all of my animals to U.S. 
Premium Beef and National Beef under this new rule. That takes 
away my freedom to market my cattle as I choose. If marketing 
arrangements are greatly reduced, cattlemen like me are the 
losers.
    In closing, my fellow cattle producers will continue to 
fight for a market-driven business climate that is free from 
government intrusion. Like I said a few moments ago, I learned 
early in my career as a cattle feeder not to judge a book by 
its cover. I am here to ask you all to do the same thing. Going 
forward, as you work with Federal agencies, I ask that you 
allow those of us with the firsthand knowledge of the industry 
to work with you to ensure a sustainable future for the U.S. 
cattle industry. Please, collaborate with me as I work to feed 
the world and pass my farm down to my children, the fourth 
generation.
    Thank you.
    [The prepared statement of Ms. Burkholder follows:]

Prepared Statement of Anne G. Burkholder, Vice Chairman, Cattle Health 
and Wellbeing Committee, National Cattlemen's Beef Association; Owner, 
                       Will Feed, Inc., Cozad, NE

    Mr. Chairman, Ranking Member Cardoza, and Members of the 
Subcommittee, my name is Anne Burkholder and I am a cattle feeder from 
Cozad, Nebraska. I am also the Vice Chair of the National Cattlemen's 
Beef Association's (NCBA) Cattle Health and Well Being Committee, the 
Chairman of the Nebraska Beef Quality Assurance Advisory Committee and 
the 2009 National Cattlemen's Beef Quality Assurance award winner. It 
is my pleasure to testify before your Committee to discuss the cattle 
feeding sector of the beef industry.
    I am an American, a wife, a mother and a cattle feeder. I care for 
and raise animals that will be harvested to feed to my family, your 
family, and families around the world. I've spent the majority of my 
life only being a consumer of beef. It is in the last 14 years that I 
have played an active role in producing beef. I am a native of West 
Palm Beach, FL and, like many of my fellow consumers, grew up with no 
direct ties to production agriculture. My husband and I met while 
studying at Dartmouth College. Following graduation, we returned to 
central Nebraska to be the third generation to work on his family's 
diversified farm. My husband is an engineer by trade and a farmer by 
heart. Shortly after our return to the farm, my father-in-law decided 
to sell the cattle feedyard because my husband had no interest in 
running it. This is where I got my start in the beef industry. I asked 
him to keep the feedyard and allow me the chance to learn how to manage 
it. Today, I am the proud owner and manager of Will Feed, Inc., a 
feedyard that finishes approximately 5,500 head of cattle annually.
    I arrived at the feedyard with bachelor's degree in psychology, an 
open mind and a solid work ethic instilled in me during years of 
athletic training in swimming and running. I had no working knowledge 
of how to care for animals or how to run a business. The first week at 
the feedyard, I learned an exceptionally important lesson: Never judge 
a group of people or an industry without gaining an educated 
understanding of what you are judging.
    In the days and months to come, I learned how to care for and 
understand cattle; how to give vaccine injections and administer animal 
health products; how to ``read bunks'' and determine nutritionally what 
my animals needed; how to drive the feed truck; how to run a scoop 
shovel; and how to work as hard as my crew. I also witnessed how much 
pride my crew took in doing their jobs to the best of their abilities 
365 days out of the year. I learned when you care for animals; your 
life and your world revolve around them. In the past 14 years, I've 
worked closely with my veterinarian and my ruminant nutritionist, and 
used my own background in psychology to build a ``holistic animal 
care'' program based on Beef Quality Assurance (BQA) practices. The BQA 
program was established in 1987, and sets forth principles and best 
management practices to use every day to ensure animals are given 
proper care and attention. BQA provides guidelines for livestock care 
and handling, nutrition and veterinary treatment and incorporates 
current EPA, FDA and USDA regulations as well as Hazard Analysis 
Critical Control Points (HACCP) principles. Today, the BQA program 
influences more than 90 percent of cattle in the United States. My 
incorporation of the BQA practices ensures that my animals are healthy 
and that the beef that they produce is of the highest quality. I have 
also built vertically collaborative relationships with my cow-calf 
producers in order to trace animal performance from birth to harvest 
and work to continually improve the beef that our animals produce.
    The U.S. cattle industry is truly a remarkable entity where a ``one 
size fits all approach'' does not work for our management practices and 
marketing plans. This type of approach prevents us from providing 
consumers with the choices they want and deserve. The simple fact is 
the diversity within our industry enables us to raise cattle in 
different regions of the United States, with diverse climates and 
natural resources, and still meet consumer demands. The diversity and 
efficiency of our industry allows us to provide beef products year-
round to consumers. Could you imagine shopping at your local grocery 
store and not having your favorite beef variety available because it 
was out of its ``growing'' season?
    Investments in research, science and technologies have created the 
foundation of modern beef production. Cattle spend the majority of 
their lives on a grass-based operation. Then, approximately 4-6 months 
before harvest, they enter a feedyard similar to mine. The feedyard 
structure allows our industry to efficiently use natural resources to 
finish cattle enabling us to deliver consistent, wholesome, safe, 
nutritious and affordable beef products to families around the world. 
My family's diversified farm is sustainable and incredibly efficient. 
We utilize our farm ground to grow crops used for animal feed that we 
feed animals that produce both nutritious protein to feed to the human 
population and natural fertilizer to feed the soil. The cycle goes on 
year after year. Its success demonstrates that we are not only stewards 
of the land and excellent caretakers for our animals, but we are also 
instrumental in feeding the world.
    The cattle business is the largest sector of our nation's food and 
fiber industry. Our industry contributes approximately $44 billion 
annually to the U.S. economy in farm gate receipts. According to the 
U.S. Department of Agriculture (USDA), there are approximately 766,350 
cow herds and more than 90 percent of cow herds have fewer than 100 
animals. Additionally, for the feeding sector of our industry, there 
are 142 feedyards (like mine) in the U.S. with 1,000 head capacity or 
greater.
    America's cattle producers are an innovative group of individuals 
and families who put the needs of their cattle before their own every 
single day. With the global population growing exponentially, the 
demand for high quality, safe, nutritious and affordable beef will 
continue to increase. The U.S. cattle industry is prepared to meet this 
opportunity as we continually look for ways to find efficiencies in our 
modern production system. Science is a critical component of the beef 
industry. Through science-based improvements in animal genetics, 
management practices, nutrition and health, beef production per cow has 
increased from 400 pounds of beef in the mid-1960s to 585 pounds of 
beef in 2005. This achievement is also noteworthy among our 
international trading partners as the United States has the largest 
productivity advantage in the world. The United States has seven 
percent of the world's cattle population but we are able to produce 20 
percent of the world's beef production. Our closest competitor is 
Australia who has two percent of the world's cattle population and four 
percent of the global beef production. The United States continues to 
outpace our international trading partners because we have invested in 
the research and science to find efficiencies within our modern 
production system. Cattlemen will continue to increase efficiencies 
based on science in order to produce high-quality beef using fewer 
resources. In addition, our industry continues to focus on our long-
term efforts to improve our knowledge and ability to produce healthy 
cattle, which are the foundation of a safe food supply.
    I'm in the business of caring for animals that produce beef. The 
knowledge that I've obtained was passed down from my father-in-law, and 
the professional consultants who bring new technology and science to my 
farm. The feedyard that I manage today does not look the same as when 
it was built in the early 1970's. It is not managed the same way 
either. Our farm continues to evolve in order to provide better care 
for our animals and a safe, high quality beef product for consumers to 
enjoy, all while continuing to protect the environment.
    Living on a farm, caring for animals and growing food is something 
that is very hard to understand from the outside looking inward. It 
cannot be learned only from a textbook because Mother Nature is our 
single largest challenge and she is very unpredictable. While I 
understand that some government regulatory oversight is necessary, it 
needs to be responsible and educated oversight that is based on sound 
science. And, I would like to see it be collaborative instead of 
combative in nature. I believe that if we take a moment to better 
understand each other, then we will realize that our goals are very 
similar and that we will be most effective in achieving those goals if 
we collaborate.
    When cattle producers hear the words ``government overreach'' one 
of the agencies that comes to mind quickly is the Environmental 
Protection Agency. Regulations currently being proposed by this 
Administration are some of the beef industry's biggest challenges. 
Cattle producers are the first line of defense in protecting the land, 
environment and natural resources. We are a livelihood that depends on 
the land to not only provide for our families but also our fellow 
Americans and consumers around the world. Cattlemen understand the need 
for science based environmental regulations that help protect our 
natural resources. Unfortunately, the EPA is plowing down a path of 
burdensome regulations that do not have the science to support its 
recommendations. The EPA is currently reviewing the standard for coarse 
particulate matter, commonly known as farm dust. A fact, and not a 
myth, is that one of the EPA's staff recommendations is to double the 
stringency of the current standard which will have a devastating 
economic impact on agriculture and rural areas. Regulations at levels 
twice the stringency would put entire regions, including my area, in 
violation of the standard. If EPA follows the staff recommendation, 
expensive mitigation measures would be required, including installing a 
million dollar sprinkler system at my feedyard. More importantly, EPA's 
charge under the Clean Air Act is to protect public health and there is 
no evidence that farm dust has an adverse impact on human health.
    The Clean Water Act is another opportunity for the EPA to legislate 
through the regulatory process. As you know, in both the 110th and 
111th Congresses, the Clean Water Restoration Act was introduced. This 
legislation would have expanded the jurisdiction of the EPA and the 
Corps of Engineers to virtually every body of water throughout the 
United States no matter the kind, size or shape of the water body. 
Fortunately, this legislation was never considered by the full House or 
Senate and cattlemen appreciate Congress realizing this bill was an 
extreme Federal power grab. However, it has recently come to our 
attention that the EPA is using a guidance document to expand its own 
jurisdiction based on the legislation that never became law. The 
guidance document is at the Office of Management and Budget and 
essentially allows EPA field staff to apply a number of approaches to 
make a jurisdictional determination. This is yet another example of the 
costly, overly burdensome regulations that are being disguised as 
``guidance,'' but history shows that this will be enforced as yet 
another regulation. These are just two current examples of government 
overreach by the EPA that will make it more challenging for those of us 
living in rural America to produce food for a growing global 
population.
    In fall 2000, my feedyard was ``inspected'' by the EPA. The 
inspection began with one of the EPA agents holding out his badge and 
telling me that I was going to go to jail if I lied to them. This 
``combative'' attitude was both unnecessary and offensive. I was 
operating my feedyard in compliance with the issued National Pollutant 
Discharge Elimination System (NPDES) permit, and had routinely had 
inspections performed by the Nebraska Department of Environmental 
Quality to ensure I was in compliance. Further into the inspection as 
we toured my feedyard, one of the EPA agents announced, ``I've never 
been this close to a cow before!'' He then proceeded to ask, ``What are 
those mounds in the middle of all of your pens? Is that manure?'' The 
mounds he was referring to were dirt mounds that make up the 
construction of our cattle pens in order to maximize cattle comfort 
during adverse weather conditions.
    When you combine the combative nature of the agents with their 
apparent lack of knowledge about agriculture, you are left with 
ineffective, offensive and non-science based regulation. While my 
feedyard was not issued a penalty following the inspection, I was 
forced to submit further information directly to EPA for a lengthy 
period of time because they did not like my record-keeping system. One 
of the complaints regarding my record-keeping system was on my weather 
records because I was not writing down ``zero'' on the days that our 
facility received no precipitation. I was only marking down the 
rainfall on the days that we actually received precipitation.
    Unfortunately, examples such as this one are not unusual and they 
are a source of great frustration and unnecessary stress to cattlemen. 
In fall 2010, I voluntarily constructed a new Livestock Waste Control 
Facility (LWCF) at my feedyard because I wanted to use new technology 
to protect the environment and improve the drainage of my cattle 
feedyard. I partnered with the Natural Resources Conservation Services 
(NRCS) office and used Environmental Quality Program Incentives (EQIP) 
funding to cost-share on the project. This cost-share plan allowed me 
to be able to afford to construct a new, lined, larger LWCF and is a 
great example of what we can achieve collaboratively to protect the 
environment. It is my opinion that tax dollars spent on collaborative 
projects such as these are the most effective way to continue to reduce 
the environmental footprint of CAFOs (Concentrated Animal Feeding 
Operations) like mine. It would be difficult to argue that the cost of 
the EPA inspection in 2000 that resulted in different record-keeping 
practices (writing down ``zeros'' on the days that it does not rain) 
had a positive impact on the environment. However, the cost-share 
dollars that allowed me to construct a new LWCF that will protect 
ground water had a tremendously positive impact on my environmental 
footprint. The difference is regulatory combativeness versus regulatory 
collaboration.
    Unfortunately, the current Administration has chosen to focus on 
emotionally based regulatory combativeness rather than science based 
regulatory collaboration. The far overreach of the Federal Government 
is becoming more and more of a commonality. The regulations coming out 
of Federal agencies like the EPA, the USDA and the Food and Drug 
Administration (FDA) continue to strain rural economies and family-
owned operations like mine. Rural America is where our food is grown, 
and regulations that negatively impact rural areas force farmers and 
ranchers to leave agricultural production. This continues to be a 
growing trend and the cattle business is not an exception. Since 1987, 
nearly 300,000 producers have left the cattle business and we are now 
looking at the smallest cowherd since World War II. Our industry 
continues to feel the effects of burdensome regulations, drought, 
increased input costs, skyrocketing land values and struggling rural 
economies.
    Animal health and well-being are top priorities for cattlemen 
across the country. My family is one of many, in the cattle business, 
that waits until after the cattle have been fed and taken care of to 
open our Christmas gifts. It's more than a responsibility; it's a 
commitment we have to the cattle to care for their needs. To keep 
cattle healthy producers utilize important tools like vaccines, 
antibiotics, good nutrition programs and herd management practices. 
Prevention of disease is a cornerstone in both animal and human 
medicine. In the feedyard, we continually monitor the cattle for any 
early signs that might indicate an animal is not at their peak 
performance. Just as important as prevention is the control and 
treatment of disease. This allows us to provide a higher quality of 
life to our cattle, while keeping the food supply safe. Working with my 
veterinarian and consulting ruminant nutritionist, I have put together 
a treatment protocol book at our feedyard with best management 
practices and protocols for everything that we do at the feedyard. From 
vaccination protocols, cattle handling techniques, ``acclimation'' 
protocols, feeding protocols, feedstuffs management, animal health 
product use protocols, euthanasia and non-ambulatory protocols and to 
biosecurity practices my treatment protocol book is the ``bible'' at 
the feedyard. It is based on BQA and the basic principle that healthy 
and well cared for cattle make healthy beef. We utilize a holistic care 
program at the feedyard, which focuses on comprehensive animal health 
and is based on an understanding of prey animal thought and behavior.
    We understand what is important to our animals and we handle them 
accordingly in a way they can understand. We take care of our animals 
so they can maintain mental, emotional and physical fitness. While 
animal health products, such as antibiotics, play a role in the herd 
health management at my feedyard, they are only one component and are 
supplemented with many other tools and practices to ensure good health. 
For instance, we track vaccine history for each set of calves all of 
the way through the lifecycle to ensure each calf maintains a healthy 
and strong immune system. We also acclimate calves coming into the 
feedyard to give them extra exercise and help them to attribute comfort 
to their new home. Both of these management tools enable me to optimize 
the good health of my animals and limit the amount of antibiotics that 
are used at my feedyard. That being said, it is important to realize 
that as an animal caregiver and a grower of food, I need to be able to 
judiciously use antibiotics in order to ensure good animal welfare and 
food safety. If I were to loose the ability to judiciously use 
antibiotics, the result would be decreased animal welfare and health, 
which would be detrimental to the human food supply as healthy cattle 
are the foundation to safe and nutritious beef products.
    Ongoing activist and media reports suggest the use of animal health 
products in animal agriculture is often inappropriate and that the use 
of these products is poorly controlled. Misleading statements like 
these have put an undue spotlight on animal health products and 
threaten to undermine the science-based approval process we have for 
these products. It is important to recognize that animal health 
products go through a rigorous, multiple-layer, science-based testing 
process before being approved for use. Additionally, all products 
approved by FDA for use in food producing animals must first pass 
significant human food safety benchmarks. Cattlemen are committed to 
animal health interventions focused on prevention of disease, control 
of disease pressure and therapy of animals with disease. Our industry 
believes the use of these products come with much responsibility and 
that is why we have worked together to create the BQA program as well. 
The success of programs such as BQA shows our industry's commitment to 
cattle health. This commitment cannot be overlooked by those who want 
to end or restrict the use of animal technologies without having any 
credible information to base their accusations.
    With 96 percent of the world's consumers living outside of the 
United States, access to foreign markets for our beef products is 
vitally important for our industry to grow and our businesses to help 
revitalize rural America. Cattlemen have long supported aggressive 
negotiating positions with our trading partners and all efforts to 
remove non-tariff trade barriers for our products. We fully support 
immediate passage of the South Korea, Panama and Colombia trade 
agreements and encourage Members of the Agriculture Committee to 
aggressively support the passage of all three agreements. Korea is the 
fourth largest export market and in 2010 accounted for more than $500 
million in sales. The current tariffs these three trading partners have 
on U.S. beef is the greatest hindrance to market access. Korea has a 40 
percent tariff, Colombia's tariff is 80 percent and Panama has a 30 
percent tariff. If our government does not take action to ratify these 
trade agreements we will continue to lose market share to our 
competitors like Australia. Additionally, we appreciate the Agriculture 
Committee's strong and vigilant oversight of the enforcement of our 
trade pacts that involve agriculture. We also want to thank the 
Committee for its investment in animal production research, which has 
provided a strong science foundation for governments and industry to 
rely on when negotiating trade agreements. We continue to recognize the 
critical role livestock production research has within our Federal 
agricultural policy. USDA's research is a cornerstone in every aspect 
of our business from animal health, food safety, animal and human 
nutrition, and with our international trading partners.
    Cattlemen fully support an open, free and competitive marketplace. 
We know that the marketplace offers many adequate risk management tools 
and that it is not in our best interest for the government to create 
policies that set prices, underwrite inefficient production or 
manipulate domestic supply, demand, cost and/or price. Cattlemen are 
committed to energy independence. However; this commitment continues to 
create challenges for cattle producers. Corn-based ethanol production 
is significant to the cattle industry because of its direct impact on 
feed grain prices. From December 2007 to February 2010, the cattle 
feeding sector of the beef industry lost a record $7 billion in equity 
due to high feed costs and economic factors that have negatively 
affected beef demand. Between 2005 and 2008, corn prices quadrupled, 
reaching a record high of more than $8 a bushel. This volatility in the 
marketplace was a direct result of competing demands for corn and 
higher energy prices. For more than 30 years the U.S. ethanol industry 
has been subsidized by the American taxpayer at a cost of more than $30 
billion. In 2010, the U.S. ethanol industry realized record exports of 
E10 reaching 46 million gallons and distillers dried grains with 
solubles (DDGS), a co-product of U.S. ethanol production, reaching 
nearly 9 million metric tons. This is a mature industry and it is time 
to level the playing field for all users of corn. We are simply asking 
for the ability to compete on a level playing field for a bushel of 
corn.
    Additionally, the market is a very powerful tool that allows beef 
producers to meet consumer needs, preferences and, most importantly, 
choice of beef products. This re-energized focus on consumer choice has 
enabled beef producers to create innovative marketing programs to meet 
this demand while enhancing their business models. We find ourselves in 
a value-added business that is driven by our consumers. Some of the 
innovative marketing tools that producers may willingly enter into are 
alternative marketing arrangements (AMAs) such as forward contracting, 
marketing alliances and packer ownership allow producers the 
opportunity to get paid for the value and investment they add to the 
animal.
    Over the past 10 years, I have worked hard to develop a niche for 
my relatively small cattle feedyard. My management philosophy is based 
on quality and not quantity. I searched long and hard for a business 
model that will enable that to work for me. Because of my focus on high 
quality animal care and high quality beef, I have established 
relationships with a group of cow-calf producers who want to follow the 
performance of their calves from birth to harvest. For this to be 
economically feasible for both the cow-calf operator and me, the calves 
that we produce must bring a premium over a ``commodity'' calf. In 
other words, the additional value that we put into the animal that 
results in higher quality beef must be passed back to us so that we can 
continue to operate. In addition, it is necessary for me to have an AMA 
that allows me to collect carcass data on the cattle that I ship to 
harvest. Without the carcass data (the grade and yield information 
about the quality of the beef), I cannot supply my cow-calf operators 
with all the data they need in order to continually improve the 
genetics and management practices on their farms.
    Historically, cattle were marketed in lots or pens with every 
animal in the lot receiving the same average price. Since producers did 
not benefit from providing higher quality beef, they had no incentive 
to supply a higher quality product or meet consumer demands. As our 
industry struggled through the 1970s, 1980s, and early 1990s with 
decreasing demand, we did not see any market driven signals to produce 
the leaner, more consistent beef consumers demanded. Many producers, 
like me took significant steps to produce high quality lean beef by 
making investments in genetics, management, and herd health to meet the 
demand we began to recognize. To pay for this investment, producers 
demanded a premium. This demand for premiums has manifested today into 
a system of value-based marketing that is reflected in the multitude of 
premiums, discounts, grids, contracts, formulas, and alliances that are 
now commonplace in the beef industry. Some of the marketing programs 
that producers participate in are:

   Certified Angus Beef.

   U.S. Premium Beef, Ltd.

   Ranchers' Renaissance.

   Harris Ranch.

   Laura's Lean Beef.

    These are just a handful of the innovative marketing programs 
available. I participate in an AMA with U.S. Premium Beef, Ltd and also 
work with Certified Angus Beef. Many other cattlemen and I have made 
the choice to participate in a program that will offer us an 
opportunity for a larger share of the consumer's dollar. These 
arrangements are market and consumer driven, and are all led by 
producers. There are many more, particularly in areas where producers 
are teaming with other segments of the industry to take advantage of 
national, regional and even niche market opportunities ranging from 
breed or genetics programs to natural and organic production. Process 
and source verified programs are utilizing today's technology, such as 
electronic identification of animals, allowing producers to become more 
efficient at raising high quality animals that yield the beef that 
consumers will pay a premium for.
    There continues to be a growing number of innovators in the beef 
industry working together to create marketing strategies to ensure the 
viability of the beef industry. This group includes a variety of 
ranchers, feeders and packers working in a collaborative manner and you 
can see the success of this innovation in the meat case. Consumers not 
only demand leaner, tender and more consistent products, but they also 
demand convenience as well. The meat case is beginning to be filled 
more so by pre-prepared products and those ready for the microwave.
    In addition to being responsive to our consumers, participation in 
these marketing arrangements provide producers with several tools to 
help improve their operations and herd management in an effort to 
capture the premiums I mentioned above. The ability to manage price 
risk is probably 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 them 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. Traditional routes of cattle 
marketing do not always offer that flexibility. Knowing that you have a 
guaranteed buyer and a price you can live with makes it easier to 
manage your day-to-day business and focus on operational improvements 
instead of always worrying where your money will come from.
    Over the past 5 years, the volatility in the marketplace has become 
extreme. However, taking advantage of AMAs and the ability to forward 
contract is a marketing arrangement that enables me to stay in 
business. Without the ability to do this, my feedyard would not be 
financially viable. The benefits of alternative marketing arrangements 
are being seen every day in the cattle business and they were supported 
by the results of the Grain Inspection, Packers and Stockyards 
Administration's (GIPSA) Livestock and Meat Marketing study conducted 
by RTI International and released in February of 2007. This 3\1/2\ year 
study was funded by $4.5 million taxpayer dollars and was billed as the 
``definitive answer'' on these issues. The study supports what many 
ranchers across the country have known all along--a market-driven 
system works. This study was based on more than half a million 
transactions representing more than 58 million head of cattle. The 
overwhelming conclusion of this study is that overall, alternative 
marketing arrangements help all sectors of the industry.
    The report states that the leading reasons producers participate in 
alternative marketing arrangements are the ability to buy or sell 
higher quality cattle, improve supply chain management and obtain 
better prices. All three of these tie into the topics we discussed 
above--higher quality cattle produce the beef products that the 
consumers demand. Providing this consumer preferred product allows us 
to capture more of that consumer dollar in the form of a premium. That 
bigger share of the consumer dollar is being passed down to the 
producer. The producer is getting a better price for their cattle and 
can use that money to continue to improve their operation and sustain 
it for future generations. The study concludes that reductions or 
restrictions on alternative marketing arrangements would cause a 
decrease in the supply of cattle, a decrease in the supply and quality 
of beef, and an increase in retail beef prices. These are results that 
would set our industry back rather than move it forward. The study 
continues by concluding that feeder cattle prices would decrease 
because of higher operating costs resulting from restrictions on 
alternative marketing arrangements. That means that in the end, it is 
the individual cow-calf producers and feeders across this country who 
will bear the brunt of government restrictions. In a time of these 
additional costs and strains on the bottom line, the last thing we need 
to do is add more burdens to our ranchers and feeders.
    When talking about improved supply management, we have to once 
again go back to the consumer. The consumer does not go into their 
local grocery store looking for Certified Angus Beef only on Tuesdays. 
The consumer demands that convenience 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. This 
allows them to ensure this product is available daily. If the packer is 
limited in its ability to source these cattle, they cannot ensure that 
there will be a steady supply of cattle entering their processing 
plants. In turn, they cannot supply Certified Angus Beef every day and 
the consumer chooses another source of protein for the center of the 
plate.
    For this reason, we oppose the proposed GIPSA competition rule. 
This rule goes far beyond the intent of Congress in the 2008 Farm Bill 
and proposes major changes to the Packers and Stockyards Act (PSA) that 
will negatively impact our ability to market cattle. Under existing 
law, you must show that a packer or processor harmed the market by 
engaging in illegal actions such as collusion, price fixing, etc. This 
is known as showing ``competitive injury.'' Under the new definitions 
included in the proposed rule, ``competitive injury'' and ``likelihood 
of competitive injury'' are redefined and made so broad that mere 
accusations, without economic proof, will suffice for USDA or an 
individual to bring a lawsuit against a buyer (packer or processor). In 
this case, a producer need only say that he/she was treated 
``unfairly'' to sue a packer or processor. There is no definition of 
what ``fair'' should be, and the term is so broad that no definition 
could be applied in the instance of cattle marketing because each 
producer has his own perception of what is ``fair.'' Furthermore, this 
change contradicts the rulings of eight U.S. Circuit Courts of Appeals 
that have upheld the need to show competitive injury to the market 
before you can sue. This will be a bonanza for trial lawyers.
    The proposed rule bans packer-to-packer sales of livestock. This 
applies to individual packers and any affiliates or subsidiaries they 
might own. First of all, if a packer selling to another packer has 
resulted in competitive injury to the marketplace, then GIPSA should 
penalize violators and enforce existing regulations of the PSA. Second, 
this will have severe unintended consequences, especially to smaller 
packers and dealers. Prohibiting packer-to-packer sales would encourage 
consolidation and displace producer livestock. For example, there is a 
beef packer located in the Pacific Northwest who also owns a feedlot in 
Southwest Kansas. Under this proposal, that company would be required 
to ship all of its Kansas feedlot cattle to Washington State for 
processing. Those cattle would displace the local cattle that typically 
supply that plant. The proposal would add inefficiencies for the 
feedlot through added transportation costs, which could result in the 
sale or liquidation of that feedlot, thereby driving consolidation and 
less competition. In addition, am I a packer because I own stock in 
U.S. Premium Beef? If so, then I would be limited to marketing all of 
my animals to U.S. Premium Beef/National Beef under the new rule. That 
takes away my freedom to market my cattle as I choose.
    I also have concerns that the new liabilities associated with this 
proposed rule will likely cause buyers to withdraw marketing 
arrangements rather than run the risk of litigation, civil penalties, 
and potential revocation of their licenses. The threat of litigation by 
trial attorneys in regards to whether or not an arrangement is ``fair'' 
will reduce and inhibit the use of alternative marketing arrangements 
that put more money in producers' pockets. If marketing arrangements 
are greatly reduced, cattlemen are the losers because it takes away 
their ability and incentive to manage risks, finance production and 
compete with one another to negotiate premiums. With alternative 
marketing arrangements being utilized by nearly 60 percent of the beef 
market, this will result in a huge shift in the way cattle are 
marketed. Even though the proposed rule does not directly ban the use 
of alternative marketing arrangements, the unintended consequences and 
the trickle-down effect will impact them.
    The membership of NCBA has consistently said that we want access to 
business opportunities that will help us improve our bottom line. 
Accordingly, keep in mind that for every agreement made by a packer, 
there is an individual rancher or feeder on the other side of that 
transaction who has decided that the agreement is in their own best 
interest, and they should be allowed to conduct that business 
privately, just like any other industry. Those cattlemen have exercised 
their personal right to willingly engage in that agreement because they 
perceive it to add value to their operation, to their business, to 
their livestock, and ultimately to their family. That opportunity in 
the end will help to continually improve their management, genetics, 
and long-term profitability. The opportunity to engage in and benefit 
from new advancements is good for the individual producer and good for 
the industry as we strive to supply the consumer with beef products 
they demand.
    A recent experience with GIPSA has shown the agency is not doing a 
good job of enforcing the laws under its jurisdiction. The most 
effective way for industry and Congress to ensure that the marketplace 
stays fair and competitive is to ensure that the laws already on the 
books are readily enforced. The PSA was passed to ensure that the 
marketplace stays competitive. USDA's enforcement of PSA and other 
antitrust laws and regulations are critical in identifying, 
investigating, and prosecuting anticompetitive actions by packers, 
dealers, markets, and others who fall under its jurisdiction. Last 
fall, the failure of Eastern Livestock Company left hundreds of cattle 
producers without payment for their cattle. Ranchers and livestock 
auction barns both were left holding the bag on more than $130 million 
in bad checks. This has threatened the viability of several cattle 
operations. It is increasingly looking more like GIPSA was not 
providing the audits and oversight of Eastern as it is mandated by law 
to do--this lack of oversight contributed to the failure. Why is GIPSA 
proposing more rules when it seems they can't enforce the ones they 
have?
    In closing, my fellow cattle producers will continue to fight for a 
market driven business climate that is free from government intrusion. 
The beef industry not only plays a significant role in the U.S. economy 
but also in rural America. We look forward to working with the 
Agriculture Committee to ensure that those of us in the beef business 
have the ability to do what we do best produce the world's safest, most 
nutritious, abundant and affordable beef products all the while giving 
consumer's the choice they deserve. Please collaborate with me as I 
work to feed the world and pass down my farm to my children, the fourth 
generation. Together we can sustain our country's excellence and 
prosperity. I appreciate the opportunity to visit with you today about 
a few of the issues impacting the feeding sector of the beef industry.

    The Chairman. Thank you, Ms. Burkholder, and we will now 
move on to Mr. Bull.

     STATEMENT OF KENNETH BULL, VICE PRESIDENT FOR CATTLE 
               PROCUREMENT, CARGILL, WICHITA, KS

    Mr. Bull. Thank you for the opportunity to testify today. I 
am a 32 year veteran of Cargill's cattle feeding and processing 
operations. My family ranches land in Brady, Texas, that has 
been in our family for more than a century.
    Cargill currently operates five fed cattle processing 
operations in the U.S. and two in Canada. We employ about 2,200 
employees at each plant, and process around 25,000 head of 
cattle per day. A 4,500 head per day packing plant would cost 
around $300 million to build, and $75 million in annual working 
capital to operate. We typically invest about $50 million in 
new capital every year, with most going toward food safety, 
environmental protection, employee safety, product technology, 
and serving our customers.
    During the last 25 years, we have increased our carcass 
segregation system from just four sorts to 32 different grades 
and brands, and our product offerings have increased from 300 
to over 3,800 in that same time, all in an effort to better 
serve our customers and to maximize the value for each and 
every part of the animal.
    As cattle numbers tighten, the packing industry can face an 
overcapacity situation. The negative packing margins from 2004 
to 2007 caused two large packing plants to close. Margins 
improved into 2010, but we now have the tightest cattle supply 
since 1950, and about a seven to ten percent overcapacity 
problem that will continue to grow as the herd declines.
    The beef packing industry is one of the most heavily 
regulated industries in the world. We deal with USDA's FSIS, 
GIPSA, AMS, APHIS, FNS. We also deal with the FDA, the EPA, the 
DOJ and the FTC. We also work with Labor Department's Wage and 
Hour and OSHA agencies, and finally we work with Homeland 
Security's ICE and Customs agencies. That is 13 Federal 
agencies, not including state and local agencies.
    There are some real growth opportunities out there for the 
beef industry, and then I want to talk a little bit about how 
government policy has us on the verge of squandering it. First, 
the opportunity. It is critical that we focus on three themes: 
quality and consistency, efficiency, and trade. All three of 
these things have a common link, a critical relationship 
between the rancher, the feeder, and the packer. In order to 
find success, we have to bring the links closer together, not 
further apart as some would like to see.
    Quality and consistency mean the beef has to taste good and 
look good on the plate, that it is nutritious, and that we have 
been responsible in our food safety mission. In cooperation 
with ranchers and feeders, Cargill has developed a program 
called Rancher's Reserve. It is a brand of beef solution 
focused on genetics, management practices and processing 
practices to deliver a consistent eating experience.
    Efficiency is all about having a system that from ranch to 
consumer is managing the ways it keeps beef affordable next to 
chicken and pork in the meat case. The cost to produce beef 
from the ranch to the packer continues to rise, and as costs 
rise, it is more important than ever that the segments of the 
beef industry work together to increase chain efficiencies.
    Trade: Nowhere is trade expansion more critical than the 
beef business. We operate essentially a disassembly business, 
and profitability means finding the best, highest valued market 
for every individual part of the animal. Last week we pulled 
together a list of seven beef products that are not 
traditionally in high demand in North America, things like 
tongues and livers. The trade last week reported that these 
products were worth almost $92 in the foreign markets. The same 
products, however, were only worth $20 per head in the U.S. 
market. As global population approaches eight billion by 2020 
and per capita GDP growth accelerates, there will be increased 
demand for protein, including beef. There is no better picture 
of this than in China, where meat consumption has grown by 600 
percent per capita in the last 30 years. Since 1998, beef 
consumption has increased by 30 percent per capita in China. 
The challenge for the U.S. industry is can we capture that 
share for the beef industry?
    I would like now to turn to what I believe is the single 
greatest policy threat in the U.S. livestock and meat sector in 
my 32 years in business. You have no doubt by now heard about 
regulations proposed by USDA that will establish strict new 
requirements in the marketing of livestock and poultry. While 
we do not have time today to get into specifics of the proposed 
rule, I would like to share that some of the concepts were 
applied in the State of Missouri in 2001, resulting in serious 
financial harm to producers and processors alike.
    In summary, these are challenging times for the beef 
sector. There are avenues to better returns and industry 
growth, trade probably being the most important. There are some 
policy options that could take us in another direction. I hope 
we choose the former.
    Thank you very much for your time.
    [The prepared statement of Mr. Bull follows:]

     Prepared Statement of Kenneth Bull, Vice President for Cattle 
                   Procurement, Cargill, Wichita, KS

    Thank you, Mr. Chairman and Mr. Cardoza for the opportunity to 
speak today about the state of the U.S. beef industry. By way of 
background, I personally am from a family that is in its third 
generation of ranching land outside of Brady, Texas that we have owned 
for more than a century. I have worked at Cargill for 32 years, all of 
it focused on various segments of the beef sector. I currently oversee 
the procurement of the cattle for our fed cattle operations.
Background on Packing Industry
    Cargill currently operates five fed cattle beef processing 
operations in the U.S. and two in Canada. In the U.S., we employ about 
12,000 people who process about 25,000 head of cattle daily in order to 
serve consumers around the world.
    Our facilities average about 2,200 employees--each responsible for 
ensuring safe food. We operate three shifts, two for production and one 
for sanitation and equipment maintenance. Each facility is divided into 
four parts: animal handling; harvest; fabrication; and shipping. All of 
our plants are located in small, rural communities.
    Beef processing is a capital intensive business. A beef plant that 
accommodates 4,500 of cattle daily would cost about $300 million to 
build today, and would require about $75 million in annual working 
capital to operate. We typically invest approximately $50 million in 
new capital in our beef business every year, with most going toward 
food safety innovations, environmental protection, employee safety, 
product technology, and serving our customers. As you might imagine, 
the financial barrier to entry is huge, and simply keeping plants 
operating in a time of increasingly tight cattle supplies only 
compounds the problem.
    This is a complex business. During the last 25 years, we have 
increased our carcass segregation system from just four sorts to 
today's 32 different grades and brands, and our product offerings have 
increased from 300 to 3,800, all in an effort to better serve our 
customers and to maximize the value for each and every part of the 
animal.
    Due to high fixed costs, beef processing margins are tightly linked 
to our ability to process as many cattle as possible for maximum 
utilization. Of course this is tied to the supply of cattle available 
to process. As cattle numbers tighten, as they have been over the last 
several decades the packing industry often faces an over capacity 
situation. The negative packing margins from 2004 to 2007 caused two 
large packing plants to close. With the ensuing ``right sizing'' of 
capacity, margins improved until mid-2010. But we're headed back in the 
same direction. The tightest cattle supply since 1950 now leaves us 
with about a 7% to 10% over capacity problem that will continue to grow 
as herds decline.
    Additionally, the rising costs to produce beef come from the 
critical inputs along the beef chain; grain and energy, labor and 
increased regulatory costs are taking their toll. I am highlighting the 
costs and the regulatory points because they have huge influences on 
the structure, evolution, and health of the industry as well as its 
ability to compete on a global basis.
    The beef packing industry is one of the most heavily regulated 
industries in the world. My colleagues and I deal with USDA's FSIS, 
GIPSA, AMS, APHIS, FNS; the FDA, EPA, DOJ, and FTC; we also work with 
the Labor Department's Wage and Hour and OSHA agencies; we work with 
Homeland Security's ICE and Customs agencies. That's 13 agencies--not 
including state and local agencies. So naturally with this kind of 
oversight--as valuable as much of it is--we nonetheless have an 
environment of additional financial stresses.

Opportunity
    There are some real growth opportunities out there for the beef 
industry, and then I want to talk a little bit about how government 
policy has us on the verge of squandering it.
    First--the opportunity. It is critical that we focus on three 
themes: quality and consistency, efficiency, and trade.
    All three of these themes have a common link--it is the critical 
relationship between the rancher, feeder, and the packer. In order to 
find success, we have to bring the links closer together, not farther 
apart as some would like to see.
    Quality and Consistency: Quality and consistency mean that beef has 
to taste good and look good on a plate; that it is nutritious; and that 
consumers can trust that we have been responsible in our food safety 
mission. In cooperation with ranchers and feeders, Cargill has 
developed a program called ``Ranchers Reserve.'' The program is all 
about raising certain kind of cattle in a certain kind of way, on a 
certain kind of diet, and processing them with a certain kind of 
technology so that they can fit into a higher value branded beef 
program with certain kinds of parameters. This program has been very 
successful, even lauded in two Harvard Business Review studies as an 
example of increasing efficiency to produce beef while providing a 
branded beef solution. This kind of producer partnership has enabled us 
to serve some major retailers with nearly 100 percent of their beef 
case. This is the kind of innovation that will deliver future success.
    Efficiency: Efficiency is all about having a system that from ranch 
to consumer is managed in ways that keep beef affordable next to 
chicken and pork in the meat case. As discussed earlier the cost to 
produce beef from the ranch through the packer continues to rise. As 
costs rise it is more important than ever that the segments of the beef 
industry work together to increase chain efficiencies. As noted 
earlier--the declining calf herd is maybe the most critical enemy of 
efficiency we face today.
    Trade: Nowhere is trade expansion more critical than with beef. And 
it always amazes me that some in our industry are against more open 
trade. We operate essentially a disassembly business. And profitability 
means finding the best, highest value market for every individual part 
of the animal. To illustrate the case, last week we pulled together a 
list of seven beef products that are not traditionally in high demand 
in North America--things like tongue and liver. The market prices last 
week said that all combined, the products were worth $91.65 per head in 
export markets. The same products were worth $28.39 per head in the 
North American market. We can show this example over and over.
    As global population approaches eight billion by 2020, and per 
capita GDP growth accelerates, there will be increased demand for 
protein including beef. There's no better picture of this than China 
where meat consumption has grown by 600 percent per capita in the last 
30 years. Since 1998 beef consumption has increased 30 percent per 
capita.
    The challenge is for the U.S. to win the business--and that is not 
at all a certainty. Brazil's herd is now double that of the U.S. But 
the U.S. has until about 2004 maintained a production edge because of 
its higher carcass weights, but that is now at par with South America. 
While Brazil's production numbers are growing, North America is in a 
flat holding pattern, to slightly declining. While the U.S. was locked 
out of many of our foreign markets after the BSE situation, Brazil was 
able to win a lot of new export business--and it is hard to regain lost 
ground. Our challenge today is whether the beef industry will have the 
opportunity to capture this growing global demand for protein--and the 
only way to do it is to grow market access through free trade 
agreements.

A Critical Challenge
    I would like to now turn to what I believe to be the single 
greatest policy threat to the U.S. livestock and meat sector in my 32 
years in the business. You have no doubt by now heard about regulations 
proposed by USDA that would establish strict new requirements in the 
marketing of livestock and poultry. One of the most critical is a 
concept that would make it easier for parties to sue packers for price 
discrimination and jury-awarded damages in Federal courts. This exact 
proposal has been ruled against by eight different Federal appellate 
courts, and even considered for hearing by the Supreme Court--and 
rejected. Any final rule that includes these provisions will be beyond 
chilling in the marketplace.
    This same kind of law passed in the State of Missouri in the spring 
of 1999. Implemented May 29, 2001, the impact on producers was 
immediate and severe as packers overnight shifted to purchasing on only 
the most basic formulas--rather than value-added or premium programs. 
The law remained in effect for 4 short months until the legislature 
repealed it in a special legislative session. Some of the implications 
of the GIPSA proposal are virtually identical to the provisions of the 
Missouri law.
    We have extrapolated from a study done by Dr. Ron Plain at the 
University of Missouri, the impact of this law on a U.S. national 
basis.
    Swine: During the implementation of the law in Missouri market hog 
prices dropped by 4.4%. The total cost to Missouri swine producers for 
the time the law was in effect was roughly $2.7 million for the 5 month 
period. If we use only a 2% impact on a nation-wide basis, the result 
would be an impact of $424 million annually for pork producers.
    Cattle: In Missouri there was a 2% negative impact on cattle 
prices. When applied to today's cattle supply the 2% discount 
represents an annual loss for cattle producers of $840 million.
    Altogether, total losses for U.S. market hog and cattle producers 
alone should be expected to be at least $1.264 billion per year. This 
does not include losses that would be suffered by our brands.
    As I said, this is the single greatest policy threat I have seen in 
my career.

Closing
    In summary, these are challenging times in the beef sector. There 
are avenues to better returns and industry growth--trade being the most 
important, and there are some policy options that take us in another 
direction. I hope it will be the former.

    The Chairman. Thank you, Mr. Bull. I will now move on to 
questions. The chair would like to remind Members that they 
will be recognized for questioning in order of seniority for 
Members who were here at the start of the hearing. After that, 
Members will be recognized in the order of their arrival. I 
appreciate Members understanding.
    I have a couple of questions I will direct specifically, 
but then if anybody wants to jump in after the first answer, 
feel free.
    Mr. Strickland, first of all thank you and your son for his 
service in the Army. As a former Army guy, I am especially 
appreciative. I would like to ask you a little bit more about 
GIPSA, and certainly the other two witnesses can jump in. I 
know you touched on it in your opening statement, but I wanted 
to try to get a little bit more in the weeds, if we could, 
because some have tried to characterize the debate with GIPSA 
in the proposed rule on livestock markets producers versus 
packers. I sense that the discussion is more complex than that. 
Can you delve into that? What is your view?
    Mr. Strickland. Yes, sir, I can. I think it is appropriate 
that you perhaps started at this end of the table, because I am 
the one that makes those decisions at the very onset that I sit 
around my kitchen table, if you will, with my family. We decide 
what genetics we can afford to buy to better accommodate the 
market and all the niche markets and all the opportunities that 
there are, to try to capture that largest piece of that market. 
In doing so, if I go out and I buy better bulls that will--from 
Mrs. Burkholder that will ultimately go to the packer, then I 
ought to be certainly financially given precedence over the 
other fellows that maybe has the same weight calves, but 
doesn't do the things that I do, that they are not going to be 
more efficient for both of them. Also if I decide to go into 
animal ID as a marketing tool, I don't want to be mandated to 
go into electronic identification or mandatory ID, but I want 
to use that as a management tool.
    Also if I put into practices there on the ranch that are 
BQA certified and use best management practices on the ranch 
also and bring a product forward, I need to be compensated for 
all the decisions and all the work that we do. Once they leave 
our farm, a lot of times they will leave--the contract will be 
done months before they leave so if they leave in August and 
September, I have already forward contracted a certain amount 
of my calves to hedge my bet on the futures markets. That is 
why I do not believe in the GIPSA rule.
    The Chairman. Thank you.
    Ms. Burkholder. I would like to answer that as well. The 
beef industry is very unique because a calf may travel through 
several different producers' hands before it becomes beef, yet 
we are all in the beef industry. And so even though we are not 
vertically integrated, we must be vertically collaborative, and 
AMAs play a very large role in that collaboration.
    Over the past 10 years, I have tried really hard to find a 
business model or a niche to make my feedyard special, to make 
it economically viable, and to accomplish the goals that I 
wanted to accomplish. I focus on quality and I don't focus on 
quantity. I have worked really hard to find cow-calf producers 
that want to trace their calves from birth to harvest so we can 
look at the efficiency and the productivity of that calf from 
the time that they are born to the time that they hit your 
plate.
    In order for that collaboration to work, we need to be able 
to have marketing arrangements so that I know when I go out and 
I work with my cow-calf operators, that I can pass extra money 
back to them, like Mr. Strickland spoke of. This way they can 
continue to do the best thing on the ranch, continue to 
increase the viability and the very positive natures of 
genetics that they play with all the time. And then I also need 
to know that that animal can perform for me in the feedyard and 
then on into the packing plant, because we are all in the beef 
industry.
    So I believe it is very important that we are vertically 
collaborative as an industry, and what bothers me the most 
about GIPSA is it shoots a bullet right in the middle of that 
collaboration, because it takes away the AMA's that we need in 
order to manage risk and manage the business side of our 
operations, while also doing the right thing for both our 
calves and the consumer.
    The Chairman. Mr. Bull, do you want to add anything?
    Mr. Bull. No, I think they covered it very well. I think it 
is clear, if you look at all of the economic impact studies 
that have been done. You know, a large portion of the potential 
damages fall to the producers, and that is because the 
potential benefits of increasing demand that all of these new 
brands and new marketing alternatives have brought to the 
table, pass those benefits back. And so they are--really the 
lifeblood of the industry is how do we increase demand?
    The Chairman. Thank you, and thanks to the panel again.
    I would like to now recognize the Ranking Member for his 
questions. Mr. Cardoza?
    Mr. Cardoza. Thank you, Chairman Rooney. I have two sets of 
questions I would like the panel to address, the first one 
dealing with conservation programs. To what extent do your 
operations, as well as the industry as a whole, use 
conservation programs such as the Conservation Reserve Program, 
EQIP, the Grasslands Preserve Program? Have these programs 
allowed you to implement practices and make changes to your 
operation that you otherwise would not have undertaken, and 
thus improved the environment and your product? How have these 
programs helped you address either Federal regulation or state 
regulation, and if the budget for these programs were 
significantly cut or eliminated, what effect would it have on 
your operation?
    Mr. Strickland. Thank you, sir, and yes, I do have an EQIP 
program on the ranch and it certainly has been very beneficial. 
I do appreciate the funding of those. They are cost-share 
funding, where I may spend 50 percent or 80 percent or 90 
percent on the practices, but I certainly--I appreciate it. 
There are so many issues within USDA and all of the different 
cost-share programs that they have. On my ranch, that is the 
only one that I have on the ranch, but within those fundings--
and going back to USDA in the State of Florida, we have a USDA 
research facility which does water quality research and 
nutrient research within the State of Florida. There are three 
of those USDA centers within the United States, in Nebraska and 
Montana. Those are totally different genetics, totally 
different water supplies, totally different rainfall and 
environmental concerns that those folks out there have. Right 
now, the funding is slated to be cut for my unit, my USDA unit 
there in the State of Florida. The unit itself actually does 
genetic research also, which covers about \1/3\ of the entire 
cattle population of the United States. Without that research 
going forward, who would then help with all those programs that 
you speak of?
    Mr. Cardoza. Thank you. I am going to ask my other 
questions so the rest of you can answer it as you go forward, 
because I have a limited amount of time. That is about 
regulatory burdens on this industry. We have heard a lot of 
concern from farmers and producers about regulatory uncertainty 
and the burdens they are under. Do you have any personal 
experiences with these regulatory agencies that have created 
cause for your concern? If you would go ahead?
    Ms. Burkholder. Yes, actually those are perfect questions 
and they juxtapose against each other very well. I do use EQIP 
funding at my cattle feedyard. I am a concentrated animal 
feeding operation, which means I operate under EPA's NPDES 
permit. As such, I am required to catch all of the liquid 
runoff that comes off of my facility when it rains, as well as 
have a comprehensive nutrient management plan for properly 
applying the solids, the natural fertilizer that my cattle 
produce, back on to our farm ground. I built a livestock waste 
control facility using EQIP funding just this past fall. I 
think that that is a great example of how we can collaborate 
together. We can use taxpayer dollars, we can use new science 
and technology in order to reduce our environmental footprint 
and work to do the best job possible.
    I would like to juxtapose that experience against an EPA 
inspection that took place at my facility in 2001. One morning 
in September in 2001, two EPA agents walked into my office 
unannounced, took out their badges and informed me that they 
were EPA agents and if I lied to them, I was going to jail. Now 
I don't know about you all, but I don't consider that very 
collaborative. I consider that combative. I took the gentlemen 
through the feedyard. We looked at all the written 
documentation that I have to have. We keep weather and rainfall 
data, we read the level of water in our holding pond on a daily 
basis. I keep a lot of environmental records for my operation. 
So we went through both the records and I took them on a tour 
of the facility. As we drove past the cattle, one of the 
gentlemen looked at me and said I have never been this close to 
a cow before. He then looked at my pens, and I have traditional 
pens that have mounds in the middle in order to offer our 
cattle the best comfort during inclement weather. And he said 
well, what are you doing with all that piled manure all over 
the place? I said I am sorry, sir, that is not manure. Those 
are my dirt mounds.
    So I tell you all of this to make a couple of points. 
Number one, as I stated this morning earlier in my testimony, 
it is very important that we work together and we accomplish a 
common goal. I want to take care of the environment just as 
much as you do, but we need to be effective and efficient in 
trying to do it. Having combative agents show up on my property 
without knowledge of my business is not an efficient use of 
funds.
    Now looking at the EQIP cost-share funding, that is a 
tremendously efficient use of taxpayer dollars, because it is 
allowing me to build a new livestock waste control facility 
that is lined, that is using modern technology and allows me to 
protect the groundwater and reduce my environmental footprint.
    So my rather longwinded answer to your question is I 
believe that we share the same goals and if we can collaborate 
together through programs such as EQIP so that I can 
continually work to improve my operation, that is a great use 
of taxpayer dollars; a much greater use than an Environmental 
Protection Agency coming to visit me and sending me a letter 
afterwards, telling me that I wasn't keeping my daily rainfall 
records correctly because I wasn't writing down zeros on the 
days that it did not rain. I was only recording rainfall when 
we actually had precipitation. As a result of that record-
keeping ``error'' on my part, I had to submit additional 
paperwork to the Agency for better than a year.
    Now, I hate to speak for other folks, but I don't think 
that did a whole lot for protecting the environment, and it 
certainly didn't come close to what me building a new holding 
pond using EQIP dollars has done for the environment.
    Mr. Cardoza. Thank you for your testimony, and thanks to 
the Chairman for giving us some extra time to explore that 
answer. I appreciate it very much.
    The Chairman. Now we will move to Mr. Gibson.
    Mr. Gibson. Well thanks, Mr. Chairman, and thanks for 
convening this hearing today. I would like to thank the 
panelists. This has already been very informative, and I would 
like to echo the comments of the Chairman as far as your 
service, Mr. Strickland, as well as that of your son. But, I 
also want to commend all of you for what you do for all of us. 
You are all servants for us in the producing of our food, and 
it is deeply appreciated.
    You know, Ms. Burkholder, just listening to your commentary 
moments ago, nearly all of my adult life I have been a soldier, 
and I started as a private and I learned firsthand what it is 
like to do the hard work of a soldier. And even as I rose 
through the ranks and ultimately commanded a brigade combat 
team, about 3,700 men and women, I never forgot what it was 
like to be a private, to be a soldier.
    So recently I asked my farmers--I have the great fortune of 
representing the 20th Congressional District in New York where 
we have over 1,000 farms. I conveyed to them that I really 
needed to serve as a farmhand. I needed to learn what it was 
like firsthand so I wouldn't have that same serious void in 
knowledge and experience. So about 10 days ago or so I got what 
I asked for, rising at 3 a.m., on duty by 3:50 a.m., and 
milking--being part of milking 400 cows, mixing feed, 
delivering the feed, cleaning stalls, feeding baby calves, and 
then having a meeting of about 50 farmers. Look, it is 1 day. 
That is hard work. I really admire and respect what our farmers 
do, and I thought about it the next morning as I was rising 
about 6 a.m., they were already at work for 2 hours. So I have 
a long way to go to continue to learn, but your point is well-
made, that all of those, whether they be serving in Congress or 
serving in Executive Branch, or doing the hard work that you 
are doing, we need to collaborate for the betterment of all the 
people in the United States of America.
    You know, I also want to affiliate myself with the remarks 
that I have heard from you today, which is very similar to what 
I have heard from our farmers and small business owners, is 
that you are not looking for a handout. What you want is some 
empathy and for us to address the impediments to growth, taxes, 
regulation, healthcare costs and energy costs. When we can 
expand--when we attack these impediments your profitability 
grows and that allows you to flourish and for all of us to do 
better. And towards that end, the remarks by the Ranking 
Member, Mr. Cardoza, really accurately describe the farming 
situation in my district in that we are having a good year so 
far, but it is very tenuous and trepidatious, going forward.
    And so one of the issues is high input in feed costs, and I 
am curious to know what your thoughts are. If you think that 
the ethanol policies that we have, tax credits, renewable fuel 
standards and the like, how you think that is impacting the 
price of corn feed, and what are your thoughts on policies to 
mitigate associated rising costs for inputs?
    Ms. Burkholder. Well, I really respect you for spending a 
day on the farm. I think that is a tremendous thing to do and, 
as you know, we face a population in the United States where 
less than two percent of us are actively engaged in feeding the 
country, that gap that exists between rural America and urban 
America really is problematic for us, so I really commend you 
for doing that.
    I do grain fed cattle. I live in central Nebraska. Our 
natural resources are such that we grow crops and then we 
finish our cattle in concentrated feeding operations like mine. 
My husband is a farmer. He grows both alfalfa and corn, a 
little bit of wheat and some soybeans. So we are a diversified 
operation.
    I believe in entrepreneurship and I believe that we always 
need to be thinking outside the box and looking for better ways 
to do things. At the same time, I do think that there is a 
point in time where an industry needs to be able to stand on 
their own. We have had ethanol subsidies in this country for 30 
years now, and I think that the market is such now that it is 
probably time to say goodbye to those. I am very grateful to 
the ethanol industry because a co-product coming out of those 
plants is wet distillers grains, and that is an absolutely 
fabulous cattle feed. Nutritionally it is very good for the 
cattle, and it is just a fabulous feed. So we certainly in 
Nebraska have greatly benefited by being able to feed wet 
distillers grains to our cattle, and at the same time be able 
to harvest ethanol from that corn plant. But I do believe that 
it is probably time to let that go. If you pay any attention to 
the markets at all, you will notice that we have had severe 
volatility over the past 4 or 5 years, and that is very 
difficult to manage. I am in the margin part of the business 
and so I am acquiring calves and I am preparing them for 
harvest. And so as feed costs go up, that makes a tremendous 
impact on my business. Five years ago we could put 100 pounds 
of gain on a calf for $40. Today is it going to cost me $100. 
So it makes a tremendous impact.
    I believe it is time for us to all be playing on the same 
level field.
    Mr. Gibson. Well I thank you very much for that commentary, 
and again, Mr. Chairman, I appreciate the hearing. I yield 
back.
    The Chairman. Thank you, Colonel Gibson. Now we will move 
to Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman, and welcome, panelists. 
I would like to ask each of you your opinions, very briefly. It 
has been about 2 years now since the country of origin labeling 
has gone into effect, and I would be very interested to get 
your response to how that has impacted your business in terms 
of any process changes, any problem areas.
    Let us start with you first, Ms. Burkholder.
    Ms. Burkholder. The very short answer to your question is I 
have not seen country of origin labeling improve my business. 
It has added cost, certainly, especially at the packing plant 
and the fabrication sector of the industry. I don't really 
believe that I have realized any gain from it.
    Mr. Scott. All right.
    Ms. Burkholder. That being said, as I said before, we 
always need to think outside the box and we always need to find 
ways to add value to what we produce, and I spend an awful lot 
of time doing that. I do track my animals from birth to 
harvest. In fact, 100 percent of the cattle that are on feed in 
my feedyard right now can be traced back to the source of 
origin and a birth date. Those animals are individually tagged 
and we are following their performance all the way through the 
life cycle. So I have chosen to use that as a niche, a higher 
quality niche for my business. I am actually marketing those 
calves as age and source verified product. Ironically enough, 
most of that product is getting shipped to Japan because that 
is what the market is dictating at the moment.
    Mr. Scott. Mr. Strickland?
    Mr. Strickland. Yes, sir, I am going to echo exactly what 
Anne has said. Bottom line, which is what keeps me in business, 
gives me the ability to take my ranch on to further 
generations, I have not seen one dime more for that program, 
which was so costly and met with so much debate. No, sir, I 
have not.
    Mr. Scott. Okay. Let me ask you, Mr. Bull.
    Mr. Bull. Yes, just really briefly. I think from our 
standpoint, obviously, we have had to add some carcass 
segregation sorts to manage the cattle by country of origin 
labeling. In order to keep those costs as small as we possibly 
could, we have chosen to do that only at one of our southern 
plants and one of our northern plants. And so it not only adds 
costs in the processing level, it certainly starts segregating 
which plants are available for some producers who choose to 
have an animal that is born in Canada or Mexico in their 
feeding operation. If you are in Kansas, you have no marketing 
outlet for those type of cattle.
    Mr. Scott. Well let me ask you specifically about the 
Canadian situation. As you know, the Canadians have brought 
suit with the WTO. Give me your thoughts on that. Do you feel 
they have a case to stand on? Are their points legitimate? Each 
of you, how do you feel about that? Do the Canadians have a 
beef with this?
    Mr. Bull. I think they probably do, but from our 
standpoint, obviously if you add a regulation that adds costs 
to a system, like country of origin labeling certainly did, but 
there is no benefit on the revenue side, then that cost has to 
be borne somewhere in the system. And today, that is being 
borne in a lower price, particularly of the Mexican feeder 
cattle coming across the border. They are now trading at a 
bigger discount to U.S. animals, and that discount is due to 
those added costs of segregating those animals going into 
country of origin labeling.
    Mr. Scott. So do you--the answer to the question is that 
you do believe that the Canadians have a point here?
    Mr. Bull. I think it has created a disparity in the value 
of the animals, outside of just the quality of the animals.
    Mr. Scott. So the Canadians do have a point, that is what I 
am trying to get to.
    Mr. Bull. Yes, sir.
    Mr. Scott. All right. Is that true with you, Ms. 
Burkholder?
    Ms. Burkholder. I don't believe that I know enough to be 
able to accurately give you an opinion.
    Mr. Scott. Okay, Mr. Strickland?
    Mr. Strickland. Sir, I am going to have to answer the exact 
same way that Ms. Burkholder did.
    Mr. Scott. All right, thank you very much, Mr. Chairman.
    The Chairman. Thank you, Mr. Scott.
    I will move to Mr. DesJarlais.
    Mr. DesJarlais. Thank you. It is DesJarlais.
    The Chairman. Sorry, sir.
    Mr. DesJarlais. That is okay. Everybody screws that up.
    Thank you all for coming today. I am a family practice 
physician by trade, but I grew up in western South Dakota, 
obviously a heavy ranch community there. I moved to Tennessee 
in 1993, and my father-in-law raises beef cattle in southern 
Tennessee. I wanted to bring some questions to you today from 
the Tennessee Cattlemen's Association. In anticipation of this 
hearing we reached out, and so hopefully the questions aren't 
redundant, but I did want to speak on their behalf.
    Mr. Bull, we will start with you. The importance of exports 
to the economic health of the beef sector has been well 
established. The question that came forth to me was how would 
Mexican retaliatory trade restrictions affect the beef market 
in the USA?
    Mr. Bull. You know, the Mexican market is really an 
interesting one. Obviously, Mexican feeder cattle come across 
the border to the United States, they are fed in the United 
States by American feeders using American grains, processed in 
American plants. Quite a bit of the product actually goes back 
to Mexico. I know during the BSE time, Mexico was probably our 
number one market for beef, and is still a very viable market 
today. It is--they are a trading partner from the standpoint of 
buying and consuming more meat. And, what we see around the 
globe is as any country's GDP starts to grow, their per capita 
growth then fills their desire for their consumers to actually 
buy higher valued proteins, and certainly we have seen that in 
Mexico. The market that we had in Mexico 20 years ago is 
dramatically different than the market we have today, and they 
are a growing and vibrant market for our products out of the 
United States.
    Mr. DesJarlais. Okay, thank you.
    Mr. Strickland, it is almost impossible to have a 
conversation with anybody in production agriculture and have it 
not somehow turn to issues regarding Environmental Protection 
Agency. One of the issues has already been addressed here in an 
amendment sponsored by Kristi Noem from South Dakota and 
cosponsored by many of us, including myself, and that is the 
dust regulations. Under the proposed EPA regulations, would the 
EPA be able to come on to your farm in dry weather when cattle 
kick up dust?
    Mr. Strickland. Sir, there are two of us here. One is from 
Nebraska which has considerable dust concerns and then there is 
me. Our rainfall down in Florida--and most of our cattle are 
free ranging. Are we concerned about that? Absolutely, because 
what costs money and undue regulations for the folks that I 
send my cattle to affects my bottom line, absolutely. In 
Florida, we worry about that and you are absolutely right. We 
have dealt with the EPA on numeric nutrient criteria down in 
Florida, and we found that some of those overriding, 
overreaching, unobtainable goals, if you will, within EPA--and 
I have jumped from dust to water, but it appears to be somewhat 
of a trend that we are concerned about, yes, sir.
    Mr. DesJarlais. Thank you.
    Ms. Burkholder, I had some questions with you about over 
burdensome government regulations, but after your testimony a 
bit ago I don't know that I want to go there, because I only 
have a minute left and I think we need about 5 days. I 
empathize with you. The question that was sent was dealing with 
the GIPSA, and I guess what we will do just briefly here, what 
is the cost and burden of the paperwork and compliance 
associated with the GIPSA rule changes, as you see it?
    Ms. Burkholder. The biggest thing for me with GIPSA is I 
don't have a business model anymore, so how do you put a number 
to that? So that is a very good question, but a very hard 
question for me to answer. I am all about paperwork. I keep a 
lot of paperwork. Whether we are talking about agent source 
verification records, preconditioning vaccine records, 
antibiotic use records, records for the EPA, I keep a lot of 
records. That is part of my job. To put a dollar figure on what 
that is going to cost me, it is going to ruin my business. I 
may not be here next year.
    Mr. DesJarlais. Thank you very much, and----
    Ms. Burkholder. May I address the dust issue briefly as 
well? Is that okay?
    Mr. DesJarlais. Oh, yes, please.
    Ms. Burkholder. We have a lot of dust in Nebraska. In fact, 
in Nebraska cattle outnumber people 4:1. My kids absolutely 
love that quote. They think it makes them very special. My 
feedyard is located out in the country, so to speak, and we are 
about 6 or 7 miles from two towns. Each town is roughly 3,000 
people, so I live in a very rural area. Dust is something that 
we live with. Most of the roads that I travel on are gravel 
roads. I would tell you that we have more dust coming off of 
our gravel roads than we do coming out of our feedyard. If EPA 
pushes this through, we will be continually out of compliance. 
I could, I suppose, spend $1 million on a sprinkler system to 
put in my feedyard, but that is not going to control the dust 
coming off the road right next door. So it really doesn't 
attain anything for us, and I would tell you that there is no 
way that Nebraska is ever going to be able to be in compliance.
    Mr. DesJarlais. Thank you, and thank you, Mr. Chairman, for 
the additional time.
    The Chairman. Thank you, sir.
    The gentleman from Iowa, Mr. King.
    Mr. King. Thank you, Mr. Chairman, and I thank the 
witnesses for your testimony.
    I turn first to Mr. Bull, and just ask as we have gone 
through the BSE debate over the years and we have watched 
things ramp up and ramp down, just taking a little temperature 
check on the industry. Is the industry closer to or further 
away from an RFID proposal than they were, say a year or 2 or 5 
ago?
    Mr. Bull. Great question. I would have said--I forget the 
exact year that I was testifying here on country of origin 
labeling and I thought there was more appetite in the House 
Agriculture Committee for an animal ID system than there was 
for country of origin labeling, and I was optimistic that we 
were moving in that direction quickly. Unfortunately, it 
certainly has met roadblocks over the years. There appears to 
be a bit of a ground swell of desire potentially for animal ID 
and traceability improvements that I think could bring enormous 
value and benefit to the industry. But I would hesitate to say 
that we are very close today to getting that accomplished.
    Mr. King. Mr. Bull, would you think we have slipped further 
from that over the last couple of years, or which direction is 
that line of scrimmage going?
    Mr. Bull. I would say it is still pretty far away. Whether 
it has gone further away, there appears to be at least a 
glimmer of discussion starting again potentially for animal ID, 
but I would still call it a glimmer. So no significant 
movement.
    Mr. King. And where I see it from where I sit, it is that 
we are probably an animal health crisis away from that, if that 
should happen. Let us hope it doesn't happen. I am okay if 
there is no crisis, so my urgency is going in proportion to 
that as well.
    But I wanted to ask Ms. Burkholder, do you use an animal ID 
system in your feed lines?
    Ms. Burkholder. We do. As I said, we trace calves 
individually from birth to harvest. For the most part, we are 
using a visual tag. I use Sampson, Incorporated as my PBP 
supplier, and as part of their program they have a very large 
visual individually numbered program compliant tag. That is 
mainly what we are using. I am using that because that is a 
great tool for my cowboy. When you are up on a horse and you 
are checking cattle and you can write down a number, you can't 
stand up there with your wand. So yes, we are using an 
individual ID system through our feedyard. In fact, many of the 
calves are carrying three different individual identifiers in 
the yard, but we are--we do use a little bit of the RFID 
technology. I have some cow-calf producers who are putting 
those tags in on the ranch. We are not using a lot of it in our 
feedyard because of those reasons that I just mentioned.
    Mr. King. What is your advice for the industry?
    Ms. Burkholder. Allow the market to drive it.
    Mr. King. Thank you. Mr. Strickland?
    Mr. Strickland. That last comment of Anne's really stole my 
thunder, by the way, Anne.
    Not only do we down in Florida raise cattle for the 
domestic market, but we also ship live animals around the 
world. Whether it is--right now we are working on a dairy 
shipment to Pakistan or we are working on horses to go to 
Guatemala, it goes back to that same concept of traceability. 
There are various ways of doing traceability because I know we 
have a lot of brand states here that feel firmly that they need 
to stick with the brand aspect of it. But right now, whenever 
we see other countries opening up their market, and if that 
country drives the boat, so to speak, and mandates that you 
shall, then I think that those producers, like myself and like 
everybody on the panel, that if there is money to be captured 
out there by doing specific things, it certainly ties back to 
the same concept. It is the very same concept that GIPSA gave 
us: the opportunity to get those niche markets and so it may be 
money well spent.
    Mr. King. And I thank you for your response. I just want to 
make my position clear is that if this happens, I don't want 
the USDA to be driving it, I want the producers to be in 
control, and that is where I have taken the initiative on this, 
but I am sitting back waiting for the industry to make some 
move. Then I will give you--take it back to you, Mr. 
Strickland. The counsel I am interested in also is every time I 
sit down and talk with anybody in agriculture, and they are all 
my neighbors around me from where I can see on my deck and all 
around, always the EPA comes up. We are a little bit 
nonspecific about what to do, but we are in this environment 
where we have at least a Republican Majority in the House of 
Representatives and we control the purse strings. Do you have 
any advice on where we might tighten those purse strings with 
regard to the EPA?
    Mr. Strickland. Well you asked the right person from 
Florida with our numeric nutrient criteria that has fallen upon 
our heads and rained amongst our shoulders with inaccurate 
science. Financial numbers that they have given us that 
initially came out with EPA to implement the numeric nutrient 
criteria, and only in the State of Florida with $113 million. 
We just finished with a study that was done by Florida 
Department of Agriculture and their ag water policy in 
conjunction with the University of Florida, and their 
agriculture and economic group there. We wanted to see what it 
was going to cost, and instead of the $113 million, we came up 
with anywhere from $800 million to $3.3 billion. EPA suggested 
that there would be 6 million acres in my state that would 
have--that would be affected by this new criteria, which by the 
way, is unobtainable. Our figures from that same group came up 
with 13.5 million acres. If there is any way to say that until 
you come up with an obtainable goal and sound science, that we 
are not going to fund something that would affect the bottom 
line of the United States of America and the State of Florida, 
then that would certainly help, but it is not specific to 
Florida. As they move, EPA controls, we have caught the brunt 
but we have the rest of the United States that is going to be 
involved in that fight if we don't stop them now.
    Mr. King. Thank you, Mr. Strickland, I appreciate your 
input on this. My clock ran out a little while ago and we will 
examine your point. Thank you.
    Mr. Chairman, I yield back.
    Ms. Burkholder. Mr. Chairman, could I answer as well?
    The Chairman. Absolutely.
    Ms. Burkholder. Okay. I want to touch on something that the 
EPA is doing right now that is a little bit back behind the 
door. I want to talk about the Conservation Practice Standard 
Code 590 regulations that are coming through the NRCS office. I 
think that we all need to be cognizant of what the regulations 
are and we need to do a good job defining those regulations 
because those regulations are ruling the way that I do my 
business. When the EPA goes through the NRCS office to do 
things like this Conservation Practice Standard Code 590, it 
makes it so that I don't know what I have to do to be in 
compliance, because there is no regulatory backup for it, okay? 
And so that makes it very difficult for me to know what to do 
to run my business to be in compliance, because it is not out 
in the open.
    Now if you look at that document, you will see in there 
that I am not going to be allowed to spread my natural 
fertilizer on my farm ground when the ground is frozen. In 
fact, for a while there was verbiage in there that I couldn't 
spread it when the wind was blowing 10 miles an hours. I didn't 
know if you all have ever been to Nebraska, but one thing that 
is constant is that we always have wind. Part of our 
agricultural operation, the sustainable cycle of my husband's 
and my operation is being able to take our crops, feed them to 
cattle, harvest a high quality human protein to sell to you, 
and also harvest that natural fertilizer that is coming out of 
the cattle to put our nutrients back into our soil. And so at 
the NRCS office, and if EPA runs the NRCS office and makes it 
so that it is very difficult for me to spread that natural 
fertilizer back on my ground, again, that is going to have a 
huge impact on the way that I run my business.
    Mr. King. Thank you.
    The Chairman. Thank you, Mr. King.
    I will now move to the former Ranking Member of this 
Subcommittee, Mr. Neugebauer.
    Mr. Neugebauer. Thank you, Chairman Rooney, for having this 
hearing. I apologize for being a little bit late here.
    Ms. Burkholder, kind of tell me a little bit about the 
cattle that are in your feedlot. In other words, are you 
feeding some of your own cattle, are you feeding cattle on 
behalf of others, and when you look at some of the potential 
GIPSA rules on marketing those cattle, do you see some pitfalls 
and some concerns that you have?
    Ms. Burkholder. Certainly. As I stated earlier, I have 
worked really hard in the last 10 years to get cow-calf 
partners that want to trace their animals from birth to 
harvest. When I go out in the country to buy calves, I am my 
own cattle buyer. When I go out in the country to buy calves, I 
look for cow-calf operators that want to at least retain a 
little bit of interest, maybe not monetary, but interest in the 
performance of that animal all the way through the life cycle. 
I do partner with some of them financially, although many times 
I am going out in the country and I am purchasing that calf 
because the cow-calf operator doesn't feel comfortable with the 
volatility of the market retaining ownership of that calf. 
Something that is very important to me is the ability to then 
provide that cow-calf producer, regardless of whether or not he 
has a financial stake in that calf anymore, with the carcass 
and the feedyard performance of that animal.
    As I said before, we are in the business of making beef, 
and if we can't vertically collaborate to do a better job, that 
is going to stagnate us in our ability to move forward and to 
continue to add quality to our product.
    So part of the reason that I am in the AMA that I am with 
U.S. Premium Beef is because they will give me detailed carcass 
data tied to an individual calf so that I can take that 
information, combine that information with the calf's feedyard 
performance, and then give all of that information back to my 
cow-calf operator so that he can go back and look and see was 
the calf efficient for me at the cow-calf level? Did he work in 
the feedyard level? What did the beef that he produced look 
like? And so that AMA is really important to completing that 
cycle to be able to trace that calf.
    Mr. Neugebauer. And so if you can receive a premium for 
delivering that high quality, then are you going to also reward 
that cow-calf operator when you--when he has calves to sell 
or--obviously you may bid a little higher for that animal?
    Ms. Burkholder. Absolutely. That is right. I want to forage 
relationships with people. I want to buy the same calves every 
year. I want to partner with the same people every year. So in 
order to do that over time, you have to take care of each 
other. We try to take care of each other and pass that premium 
back and forth.
    Mr. Neugebauer. So if the GIPSA rules begin to bring a 
liability for--to making that differentiation or create some 
flaws in the marketing system, that is disincentive for you to 
do that, is it not?
    Ms. Burkholder. Absolutely. It ruins my entire business 
model. I have to go back and figure out how to feed cattle, 
because the way that I am doing it now, it wouldn't work.
    Mr. Neugebauer. Thank you.
    Mr. Bull, a number of people have said that this--one of 
the elements of the GIPSA rules is that it bans packer to 
packer transactions. Some people think that will have some 
unintended consequences. Can you kind of--a lot of people don't 
understand what those are. Can you elaborate on those just a 
little bit?
    Mr. Bull. Certainly. From our standpoint, we do not buy fed 
cattle from any of our competitors; however, some of our 
competitors have feedlots that are not very well positioned to 
their packing plants, and to save the freight and expense they 
sell to a competitor of theirs. I think some of the best 
examples to really get to the heart of the packer to packer ban 
site, because there are some issues related there that are 
pretty much a nuisance. But to the heart of it, there has been 
some great branded beef operations that have been set up by 
producers, Myers Natural Angus, Nolan Ryan Beef, and on and on 
around this country, and because of the classification they are 
packers, but they are not big enough to own a packing plant, 
nor do they even want to own a packing plant. And so they make 
arrangements with processors like myself who will process those 
cattle for them, then they sell the meat out of that business. 
So they are producers that have grown a brand, put a lot of 
energy around it, and now have created a branded meat solution. 
The packer to packer ban would actually either force them to 
sell to me or go out of business or buy their own packing 
plant, and to me, that is the heart of some of the unintended 
consequences that we have seen from some of these rules.
    Mr. Neugebauer. I think one of the concerns a lot of us 
have is that business models that have worked very successfully 
are jeopardized by these rulemaking processes, and particularly 
when I think about it--and I go back to Ms. Burkholder, even 
possibly Mr. Strickland, is these marketing arrangements 
between--whether it is the cow-calf and the feedlot or the 
feedlot and the packer, is people have established, as Ms. 
Burkholder said, business models, which in some cases, the 
livestock business is a leveraged business. It requires a 
tremendous amount of capital, and many of the financing 
arrangements for these operations are based on somewhat of the 
certainty that these marketing agreements provide for basically 
everybody up and down the chain.
    Mr. Strickland, are you concerned about the--having those 
kinds of impact?
    Mr. Strickland. Yes, sir, without a doubt. Yes, sir, 
because it all starts right here at this end of the table and 
goes to the other end of the table. What we do on our ranch, 
whenever I invest that money in better bulls, whenever I invest 
that money in individual IDs, whenever I invest that money for 
age and source verification, I want a premium and I want to be 
paid for it. It is a competitive market and we live in the 
United States. I understand competition, and I am going to try 
to do my best to produce a very healthy product, but I still 
need money to pay the bills on the ranch. I want to be paid for 
them and I strongly feel like this GIPSA rule will prohibit me 
from dealing with people like Ms. Burkholder next to me and on 
down the road, whether it is Amarillo, Texas, or Oklahoma City.
    Ms. Burkholder. Sir, if I could offer one more comment. I 
think that we need to remember that the consumer has a right to 
have a choice, and one of the things that these niche markets 
or these AMAs have allowed is the production of a slightly 
different type of product that the market, the consumer has 
said that they desire. I think that a healthy business 
continues to evolve to meet the needs of the consumer, of the 
folks that are buying our beef. And so I want everybody to 
remember the fact that these AMAs are helping to give the 
consumer what they want, and I think that at the end of the day 
that is very important.
    Mr. Neugebauer. Yes, one of the important things about some 
of these niche products and marketing processes is what we have 
demonstrated is the market is much more powerful and stronger 
than a bunch of government regulations. My big fear here is 
that the government comes in and causes either some market 
distortion, or in many cases, elimination of some of the 
choices as Ms. Burkholder said.
    Mr. Chairman, this has been a great panel, outstanding 
panel. Thanks for having this important hearing.
    The Chairman. Thank you, sir. Being that there is no more 
questions, I want to thank the witnesses for their testimony. 
As I said in my opening statement, this is the first, 
hopefully, of many topics that we will delve into on this 
Committee, but I think that this was a great start. I didn't 
know that we had two Floridians here. I don't know how you go, 
Ms. Burkholder, from West Palm Beach to Nebraska, but you are 
an excellent spokeswoman for your trade. I appreciate all the 
testimony of the witnesses today.
    With that, under the rules of the Committee, the record of 
today's hearing will remain open for 10 calendar days to 
receive additional material and supplemental written responses 
from the witnesses to any question posed by a Member.
    This hearing of the Subcommittee on Livestock, Dairy, and 
Poultry is adjourned.
    [Whereupon, at 10:42 a.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

 Resolution Submitted by Hon. Leonard L. Boswell, a Representative in 
                           Congress from Iowa

National Farmers Union
Special Orders of Business 2011
Farmer and Rancher Bill of Rights--GIPSA Rule
    Whereas, the Grain Inspection, Packers and Stockyards 
Administration (GIPSA) was created in 1994 as a merger of the Packers 
and Stockyards Program, established in 1921 under the Packers and 
Stockyards Act to regulate livestock marketing activities at public 
stockyards and the operations of meat packers and live poultry dealers, 
and of the Federal Grain Inspection Service, founded in 1976; and

    Whereas, the number of U.S. beef and hog operations has been 
rapidly declining, from 660,000 hog farms in 1980 to only 67,000 today, 
and, in the same period, 1.27 million beef cattle operations to only 
742,000; and

    Whereas, National Farmers Union commissioned an economic report in 
2007 to gauge market concentration by the percentage of the marketplace 
controlled by the top four participants (known as CR4) which found that 
the CR4 for beef packing is 81 percent and 65 percent for pork 
processing; it should be noted that economists consider a CR4 in the 
range of 40 to 60 percent to be the level at which competition is lost; 
and

    Whereas, the Government Accountability Office found in 2000 GIPSA's 
investigations were planned and conducted primarily by economists 
without the formal involvement of attorneys from USDA's Office of 
General Counsel, resulting in a lack of emphasis on assessing potential 
violations when investigations were initiated and conducted; and

    Whereas, in several lawsuits filed by producers against processors 
in the recent past, a 12-person jury found unanimously in favor of the 
producer due to unfair practices by integrators, but then later an 
appellate court of three judges reversed the decisions by stripping 
authority away from the Packers and Stockyards Act (PSA) despite 
dissenting views from the USDA, the agency that has regulatory 
authority over the law; and

    Whereas, the authors of the 2008 Farm Bill recognized certain 
aspects of the PSA needed clarification and directed USDA to write 
regulations with respect to the PSA to establish criteria that the 
secretary of agriculture will consider in determining if certain 
actions taken by packers, processors or integrators constitute a 
violation of the PSA; and

    Whereas, NFU submitted comments to the USDA in response to the 
GIPSA rule and asked for greater explanation of what business records 
must be disclosed by packers and processors to justify differential 
pricing schemes, more clarity with regard to the required submissions 
of sample contracts, and to ameliorate the consequences a producer may 
directly or indirectly experience from a full ban on packers selling to 
other packers; and

    Whereas, USDA and the Department of Justice held five joint 
listening sessions throughout the country in 2010 to examine the issue 
of concentration and competition in agriculture, which was an 
unprecedented signal that the Federal Government intends to seriously 
enforce the PSA;

    Therefore, Be It Resolved that the Secretary of Agriculture should 
push forward with full implementation of the GIPSA rule to return 
protections to producers from the misuse of market power and 
consolidation of the beef, pork and poultry industries, as the original 
law intended; and

    Be It Further Resolved that the Secretary of Agriculture and 
Attorney General are requested to act posthaste on the findings from 
the five workshops held on consolidation and lack of competition in the 
agriculture industry in 2010; and

    Be It Further Resolved that USDA should recognize that many 
livestock buyers have multiple independent livestock operator clients 
and should be treated differently than the buyers representing major 
packers; and

    Be It Further Resolved that USDA should calculate the CR4 for all 
of the major meat sectors on an annual basis and publish the data in a 
user-friendly format.

                                  

```