Beef leaders testify before the Senate about industry challenges

Ranchers and economists share insights on cattle markets, labeling, traceability, animal disease, trade barriers, packer consolidation and more.

Amanda Radke

September 25, 2019

11 Min Read
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This week, America’s cattlemen and women went beyond their pasture gates to testify in front of the U.S. Senate Committee on Agriculture, Nutrition & Forestry.

As the committee considers the reauthorization of the Livestock Mandatory Reporting Act, U.S. Senator Pat Roberts (R-Kan.) held a hearing to listen to testimonies from industry leaders in the livestock and poultry sectors.

At the hearing, Senator Roberts, who serves as chairman of the committee, said, “These industries are the backbone of American agriculture. Grain production, equipment manufacturing, veterinary services, livestock markets, and many other businesses that populate rural towns rely on this sector to support their own livelihoods.

“Our modern beef industry, and the broader livestock and poultry industries, have changed dramatically since the heyday of the cattle drives. But the importance of your industries to rural communities and American agriculture continues. Yet, it’s a business fraught with ever-evolving challenges.

“Production cycles in the livestock and poultry sectors can span years. A single event—such as a hurricane, a wild fire, a disease outbreak, the loss of a processing plant or an export market—can have a ripple effect that sends shock waves throughout the industry. When onerous regulatory burdens that often confront this sector are added to the mix, growers and ranchers can find it difficult to simply do what they love—raise livestock and care for their land.”

Related:Supplies will keep weighing on markets

Today, I will offer the Reader’s Digest version with clips of some of the testimonies offered by voices in our agricultural community.

First out of the gate was Jennifer Houston, National Cattlemen’s Beef Association (NCBA) president from Sweetwater, Tenn., who said they want to guide discussions based on “facts not emotions” after the USDA completes its study and provides recommendations to move forward.

An excerpt from Houston’s testimony reads, “I want to start by thanking you, Chairman (Pat) Roberts and other members of the committee who have been helpful over the last few weeks as we have dealt with the recent fire at the Tyson plant in Holcomb, Kansas. We also support the work of (Agriculture) Secretary (Sonny) Perdue and look forward to the results of the USDA investigation.

“All of these efforts show that Congress and the Administration understand this plant was a vital component of the beef supply chain, and we appreciate you getting a quick response from the USDA and the CFTC. This situation in Kansas highlights the importance of both inter-agency cooperation and the need for Congress to give the agency the regulatory tools needed to address real time issues.

Related:Markets continue recovery from Tyson beef plant fire

“This is the reason NCBA strongly encourages the committee to continue its work to push for a much needed CFTC authorization and a timely mandatory price reporting reauthorization. These agencies are vital to have functioning cattle markets for our producers across the nation.

“NCBA strongly supports mandatory price reporting and appreciates the work that USDA employees do every day to provide the cattle industry with market data that assists our members in making sound business decisions.

“We are currently updating our policy for this issue as we wait for USDA to conclude their study on the current five area reporting regions. with these findings we will then work for advocating for sound advancements that are backed by research. This is perhaps the most studied NPR reorganization we have seen, and it shows that we want facts to drive the decision making and not emotions. Mandatory price reporting has always had a consensus approach to its reauthorization and NCBA hopes it will continue to work in that fashion.

“The future success of the U.S. beef industry relies on competitive market access to a growing consumer base in Asia. In 2018, we sold over $8 billion of U.S. beef to foreign consumers, with one-quarter of those sales coming from Japan. We also still need Congress to ratify the U.S.-Mexico-Canada agreement as soon as possible to send a message to the rest of the world that the United States is open for business.

“I’m proud to lead and represent the members of NCBA, as we fight tirelessly to improve the lives and business prospects of every single member of the cattle industry. As Henry Ford said, ‘Don’t find fault – find a remedy.’ That’s exactly what NCBA will continue to do.”

Also testifying front of the committee was Shane Eaton, member of the United States Cattlemen’s Association and owner of Eaton Charolais in Lindsay, Mont. Eaton offered a different perspective on the issues facing U.S. beef producers today.

Speaking at the hearing, Eaton said, “U.S. ranchers are committed to producing a high quality, healthy product that meets and exceeds environmental standards, along with ensuring both working lands and open spaces for public recreation and enjoyment. When ranch families are successful, everyone benefits.

“That being noted, U.S. ranchers are facing unprecedented challenges to their livelihoods. Markets are unnecessarily distorted and irregularities influence the daily cattle market resulting in a lack of competition and true price discovery.

“We can address these challenges in three areas. The first being trade. Exports are critical, and we are pleased to see progress on FTA in Japan. When it comes to China, instead of timeliness and certainty, we deal with tariffs and trade embargoes. The China trade talks needed a definitive timeline.

“Our domestic meat counter reflects the meat counter of global trade. Congress can and should implement a truth in labeling program for meat. Confusion at the meat counter undercuts both the U.S. beef producer and consumer.

“Second, transportation. This Congress has worked in a bipartisan manner to modernize our service rules, so let’s continue these efforts and finalize a livestock transportation solution.

“Third, marketplace governance. Everyone is well aware of the recent packing plant fire. This incident shined a spotlight on a marketplace void of fundamentals and functionality. While the packers and stockyards investigation takes place, we offer the additional points for consideration.

“Create a CME Cattle Working Group for improving operations linked to CME cattle contracts. Link the CME live cattle contract to the USDA weekly Choice spread quality percentages. The CME should utilize real time information and data for calculating the feeder index. Finally, the CME should install a time-delay speed bump to level the playing field for all traders.

“This committee is tackling the reauthorization of mandatory price reporting. We need a new division for non-native live cattle in mandatory price reporting, which would instantly bring the need of price discovery to live cattle trading. Non-native feeder cattle imported into the U.S. are reported as domestic. Notably, these cattle do not meet the CME contract specifications for live cattle delivery and for calculating the feeder index.

“Most egregiously, these cattle can negatively influence the live cattle trade, the base price for formula cattle and the futures market. This glaring loophole could be fixed by this committee in a bipartisan fashion to create a competitive playing field for producers.

“Finally, undo preferences and business justification provisions are often tossed around as a regulatory burden, when in actuality there is a clear need to clarify the Packers and Stockyards Act definitions. If these key obstacles and loopholes are not addressed, the U.S. domestic cattle production and rural communities will collapse, and go the way of other livestock sectors, becoming corporate contract growers. We ask this bipartisan committee for bold and immediate action.”

Testimonies were also offered by representatives of the National Turkey Federation, American Sheep Industry Association and the Iowa Pork Producers Association.

Providing a 30,000-foot view of the industry at large was Jayson Lusk, PhD, distinguished professor and head of the Department of Agricultural Economics at Purdue University.

In his allotted four-minute time slot, Lusk explained to the committee, “Population and income are two key drives of meat demand. The slow U.S. population growth and concerns about an economic slowdown indicate the potential for weakening demand in this country. Health, environmental and animal welfare criticisms coupled with emerging plant and lab-based alternatives are also significant headwinds. These factors suggest meat demand growth is largely expected to occur outside of the United States.

“Having access to consumers in other countries has become increasingly important to the livelihood of U.S. livestock and poultry producers. The U.S. exported about 12% of beef, 22% of pork and 16% of poultry produced last year. Thus trade agreements are important to help U.S. producers reach consumers who value their products most.

“Some producers have expressed concerned about competition from imports, but the U.S. is a net exporter of meat and poultry, and the types and qualities of meat we export tend to differ from the cuts we import. There have also been some calls to renew mandatory country-of-origin labeling; however, to the extent that consumers are truly willing to pay a premium for U.S. meat, there remain opportunities for private entities to take advantage of this marketing opportunity.

“The current authority for livestock mandatory reporting is set to expire. It’s important for this policy to continue to modernize and be agile in response to the pace of change in this industry.

“One challenge is the dwindling share of cattle and hogs sold in cash markets, which serve as the base price in formula contracts. There are significant benefits to formula contracts, and more producers have voluntarily chosen this marketing method over time, but questions remain about the volume of transactions needed in the cash market to facilitate price discovery.

“Last month, a fire at a packing plant in Kansas renewed discussions about packer concentration. An unexpected reduction in processing capacity reduced demand for cattle, thereby depressing cattle prices. The need to bring in additional labor to increase Saturday processing involved additional costs that pushed up the price of wholesale beef. These price dynamics, while detrimental to producers, are not surprising and are not inconsistent with the model of competitive outcomes and fundamental workings of supply and demand.

“I urge this committee to pay close attention to emerging animal disease issues. African Swine Fever (ASF) has caused significant disruption to the Chinese hog supply, and the impacts are reverberating through global agricultural markets — reducing demand for U.S. soybeans and inducing substitution toward beef and poultry.

“Our pork exports are rising, but they are not what they could have been had China not raised tariffs. If a similar outbreak of ASF were to occur here, U.S. pork producers would stand to lose $7 billion/year. This, of course, is not the only concern. An outbreak of foot and mouth disease or the return of avian influenza could have similar devastating impacts. Thus there is a need for additional funding for research to combat foreign animal disease.

“Finally, there is also a need for funding to improve productivity of livestock and poultry sectors. Productivity growth is the cornerstone of sustainability. Had we not innovated since 1970, 11 million more feedlot cattle, 30 million more market hogs and 8 million more broilers would have been needed to produce the amount of beef, pork and chicken U.S. consumers actually consumed last year.

“Innovation and technology saved the extra land, feed and water these livestock and portly would have required, as well as the waste and greenhouse gases that they would have emitted. Investments in research to improve the productivity of livestock can improve producer profitability, consumer affordability and the sustainability of our food supply.”

You can watch the full hearing by clicking here. The discussion was productive, informative, educational and insightful. I encourage you to check it out.

Where do we go from here? Is there any relief in sight for the American beef producer facing tough times?

There are many ways to complete a jigsaw puzzle. You can find the edge pieces first and work your way in. You can locate different colors and sort the pieces that match before putting the puzzle together. You can select pieces at random and use trial and error to find the pieces that line up together.

I use this analogy to say this — there are many voices chiming in on this discussion, beyond what I shared here in this post. All are passionate, and I believe most have good intentions. Although, there are some people who simply want to capitalize on the hysteria and desperation felt in our agricultural community right now, so buyer beware.

At the core of this issue, I do believe science, fact, reason and reality needs to drive these discussions more than emotions. Yet, I know this is easier said than done when stress is running at an all time high for so many.

Many of our nation’s beef producers are experiencing great challenges in 2019. Between extreme weather and volatile markets, coupled with societal demands, retailer pressures, regulatory burdens and rising debt loads, there are many operations that won’t make it through.

However, if we are truly to fix what ails the cattle industry right now, let’s not slap a BandAid on a bullet wound. Let’s take the time to get it right to ensure beef producers don’t just survive the next two years but the next twenty years, as well.

The opinions of Amanda Radke are not necessarily those of or Farm Progress.

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