Statement of Senator Tom Daschle before

the Senate Committee on Agriculture, Nutrition, and Forestry

Hearing on Low Livestock Prices

June 10, 1997

Mr. Chairman, thank you for convening the Committee to consider factors causing sustained low prices in the livestock industry and the extent to which industry concentration may be contributing to this effect. I look forward to discussing the most appropriate role for Congress to play in ensuring the continuing vitality of our agriculture industry with respect to these issues.

I am very pleased to note a number of South Dakotans in attendance at this afternoon's hearing. I am happy to welcome Herman Schumacher, who is here to testify on behalf of the Livestock Market Association, and Richard Kjerstad, who will testify on behalf of the South Dakota Farm Bureau. I also am pleased to recognize Bob Jewett, attending on behalf of the South Dakota Sheep and Wool Association. Mr. Jewett has prepared written testimony that I would like to have submitted for the record. Finally, Lee Swenson, testifying on behalf of the National Farmers Union, happens to be a South Dakota native. I appreciate the effort these gentlemen as well as our other witnesses have made to be here today, and I look forward to their testimony.

It is true that as technologies, consumer preferences, and market opportunities in agriculture change, producers are affected in a range of ways. Some have significantly changed their operations to stay in business, and some have left farming altogether. Nevertheless, I am alarmed by the magnitude of attrition we are seeing in some sectors of the agriculture industry; I think we need to take a close look at these trends and ask what they mean for the long-term viability of agriculture in the United States.

When Secretary Glickman came to South Dakota in April to discuss the farm economy, 1,700 people from six neighboring states came to hear what he had to say. I think that is a fairly compelling sign that something is not right in agriculture in the northern plains. In South Dakota, smaller producers are leaving the industry literally by the hundreds. According to South Dakota State University, in the past five years South Dakota has lost over 1,000 of our smaller cow/calf operators, and over 800 small feedlots (less that 1,000 head). In the last year we have seen two packing plants close, Dakota Pork in Huron and an IBP beef-processing plant near the Minnesota-South Dakota border, restricting marketing opportunities for producers.

Of course the impact of these changes on rural communities is troubling -- when Dakota Pork closed, for example, over 800 jobs were lost in a fairly small town. But I am concerned that these changes may also compromise the industry. Small business plays an essential role in any market; it is small business that can respond most rapidly to changing consumer demand, and small business that is most likely to innovate and meet the preferences of niche markets. As packers and feedlots continue to merge, as smaller operations go out of business, and as producers face progressively fewer markets for their production, we lose an important segment of the industry. The result will be a less diverse, less responsive marketplace.

I commend the actions USDA has taken in response to mounting concern over sustained low prices and increasing livestock industry concentration. Most recently, Secretary Glickman sent a group of officials to Montana to discuss the petition filed last year by the Western Organization of Resource Councils related to captive supply and secret contracts in the industry. He also has expressed support for the President's concentration investigation currently underway, urging attention to concentration in agriculture. While much remains to be done, I genuinely appreciate the fact that Secretary Glickman is the first Secretary of Agriculture to make concentration in the livestock industry a priority. His willingness to grapple with this difficult issue makes a real difference in the ability of members of Congress to improve conditions back home.

One step I hope we will decide to take soon is to increase market transparency so that our producers at least have a chance to compete. The majority of producers who talk to me about conditions in the industry today simply say they want a fair shake. They want a chance to work hard to produce a high quality product and to sell it for a fair price. We expect our foreign markets to be transparent so that we can compete abroad and producers should be able to expect the same of our domestic markets.

Producers and farm organizations have been saying for some time that as prices and terms of trade become increasingly limited, there is insufficient information to determine the fair market price for livestock. I continue to hear that not only is complete price information vital to an efficient market, but also that it may reduce the potential for exploitative relationships in the industry. I appreciate that USDA publishes voluntarily reported price information. Nonetheless, the contract prices that currently are not reported may have market distorting effects because reported cash prices do not reflect true market conditions. Formula pricing, captive supplies, and vertical integration all contribute to transactions off of the cash market, and severely impede many producers' ability to compete.

In response to this development, I and a number of my colleagues in the Senate support a mandatory price report pilot to determine the impact of price reporting on domestic cattle prices. This bill, S. 16, would provide the Secretary of Agriculture the authority to implement such a step on a temporary basis. The Secretary has endorsed this approach, and is requesting the authority to use this tool in combination with existing USDA reporting measures.

As a complement to improved price reporting, I also support USDA's request for funding to improving the investigatory and enforcement capabilities of the Grain Inspection , Packers and Stockyards Agency. According to a 1997 Office of Inspector General evaluation of GIPSA's effectiveness at monitoring and enforcing the Packers and Stockyards Act, GIPSA's traditional investigatory methods are no longer adequate. USDA plans to provide GIPSA an infusion of staff trained to carry out the complex modeling and litigation required to enforce the Packers and Stockyards Act today. I strongly support this step, and am hopeful that through the appropriations process these resources will be made available.

An additional step we can take to increase information in the market is establishing country-of-origin labeling. Consumers know where every product they buy comes from except the food they feed their families. This does not make sense. USDA supports implementing a voluntary "Made in the USA" label, and in April they held their first public meeting to consider the issue. I applaud this action and will be following closely USDA's development of a voluntary label, but I also think we should be prepared to implement something that goes further if it improves information available to consumers.

In addition to discussing S. 16 and the merits of country-of-origin labeling, I look forward to hearing other ideas that the witnesses testifying before the Committee this afternoon wish to share regarding what would be helpful to the livestock industry today. Improving market transparency and price discovery is just one area to address. We should be looking for ways to foster cooperatively-owned businesses, to create opportunities for smaller producers to benefit from production of higher quality meat and meat products, and to even out the information and technology available to sellers and buyers at all levels of the industry.

I am committed to identifying steps Congress can take this year to improve opportunities for smaller livestock producers to compete and thrive in the industry, and this hearing is a critical step in that process. Again, I want to thank the Chairman for convening the Committee for this important discussion. I thank each of the witnesses for their testimony this afternoon. I appreciate the important information and insights they will contribute to this discussion.