TESTIMONY OF PHILLIP KLUTTS

PRESIDENT OF THE OKLAHOMA FARMERS UNION

REPRESENTING THE NATIONAL FARMERS UNION

MANDATORY PRICE REPORTING

PRESENTED TO THE

SENATE AGRICULTURE COMMITTEE

MAY 26, 1999

STATEMENT OF PHILLIP KLUTTS, PRESIDENT OF THE OKLAHOMA FARMERS UNION, TESTIFYING ON BEHALF OF THE NATIONAL FARMERS UNION, PRESENTED, TO THE SENATE AGRICULTURE COMMITTEE, ON MAY 26, 1999.

Mr. Chairman, thank you for calling this hearing on mandatory price reporting and country of origin labeling, and for inviting me to testify. On behalf of farmers and ranchers across the nation, I would also like to express a sincere thanks to Senator Daschle, for the leadership he has provided in bringing this issue to the forefront. This has been a long struggle that has taken years and we appreciate his commitment, as well as the work of Senator Tim Johnson and Bob Kerrey and others to help resolve this problem.

I am Phillip Klutts, president of the Oklahoma Farmers Union, and a director for the National Farmers Union. I also serve as a director of the National Cattlemen's Beef Association. I farm and raise cattle on about 2,000 acres in east central Oklahoma. Today, I am testifying on behalf of the families who are members of the National Farmers Union. We strongly support mandatory price reporting and country of origin labeling and have for many years. These are two of the top legislative priorities for our organization.

Mandatory Price Reporting

National Farmers Union supports legislation to require meat packers to electronically report to USDA information relating to prices, volume, and terms of sale for all livestock transactions,

including formula contracts, cash sales, and imported cattle, as well as transactions involving livestock products. The agriculture secretary should be required to publicly report the information the next business day or as soon as practicable after the procurement of the livestock or meat products. The information should be reported in a form that is readily understood by producers, consistent with how producers market their animals.

We also support requiring packers to submit a copy of their contracts to USDA, where they would be made publicly available.

Any action that will improve livestock prices will have broad support among farmers and ranchers. More complete market information will help accomplish this objective.

Mr. Chairman, mandatory price reporting has been endorsed by all farm organizations that represent cattle producers. In fact, leaders from 29 farm organizations representing most farmers from across the country met for an agricultural summit, organized by Farmers Union, on April 27, in St. Louis, Missouri. Participants unanimously agreed to support mandatory price and volume reporting for all livestock slaughtered, processed or marketed in the U.S. by large packers, processors or importers that control a significant portion of a national or regional market for a particular commodity.

One of the biggest challenges in agriculture today is lack of competition in the livestock market. This situation is compounded by the fact that animals are often advance-contracted, leaving only a small number of animals to be sold on the open or spot market. The small number of packers, coupled with the small percentage of animals sold publicly, have created a situation where packers know precisely what the going price is, while producers are left in the dark. While price reporting alone may not increase the number of buyers, it will at least tell us cattle producers where the packers, who ultimately set the price of all cattle, get their cattle and what they pay. This should at least give us a starting point in pricing and marketing our cattle.

Our board has endorsed S. 19, introduced by Senator Daschle, and we also support S. 675, which has been cosponsored by many members of the Agriculture Committee.

Mandatory price reporting is not difficult to implement. The United States already has a system for voluntary price reporting, thus no new bureaucracy is necessary. Currently, some feeders and processors voluntarily call USDA daily to provide price information. However, because the system is voluntary, some prices are not reported. This is particularly true for livestock sold through formula or open-ended contract pricing.

Last fall, USDA released a report entitled "Hog Procurement Practices in the Western Cornbelt States." Among other information, the report documented that the reported prices did not accurately reflect the market price on the whole. This does not mean that the reporting was false--only incomplete. In fact, price premiums are sometimes paid, with the stipulation that the price must not be reported. As a result, the average reported price may be lower than the actual average market price.

A concern that is sometimes raised on price reporting is that it may be too burdensome for a small business. However, this concern can be remedied by excluding small packers from the reporting requirement.

A second concern that has been raised is that the reporting may force businesses to disclose proprietary information. This concern can be addressed by keeping information from a specific firm confidential, and disclosing only prices from the industry as a whole.

Last fall, Congress enacted legislation calling for an 18-month investigation and study of price reporting, designating 12 months for collecting information and six months for analyzing the information. We do not need any more studies on price reporting. We need action! Congress should immediately repeal the study and enact legislation requiring price reporting.

Across the country, states are beginning to adopt state laws to fill the void of mandatory price reporting. South Dakota became the first state to enact legislation calling for mandatory price reporting for livestock sales taking place within the state. Nebraska's unicameral legislature passed price reporting by a vote of 48-0, and Missouri passed legislation requiring price reporting and country of origin labeling, by a very strong margin. Minnesota, Iowa, and other states are also considering related legislation.

Country of Origin Labeling

We support country of origin legislation, including S. 242, introduced by Sen. Tim Johnson and several other members of this committee. The bill requires country of origin labels on muscle cuts and ground products of beef, lamb, and pork.

Given the choice, we believe the American consumer will choose high quality U.S.- produced, meat, over imports in most cases. Yet, consumers have no way of knowing if the meat they are buying was produced in the United States or some other country. The implication is that is U.S. product because it has been graded and inspected by USDA. However, that does not reveal the country of origin. We fully support the consumers' right to know where their food is produced, and as producers, are proud to tell the public what we produce. Consumer surveys show that consumers support country of origin labeling and the National Consumers League has endorsed country of origin labeling as well.

We believe labeling is consistent with trade agreements, as long as imported products are treated the same as domestic products. Labeling also levels the playing field among trade partners, since many countries already require country of origin labeling.

Critics of country of origin labeling contend it is too costly to implement, yet labeling occurs in many sectors of our economy, including agriculture. Labeling can be done in a manner that minimizes cost since both imported carcasses and imported meat products are required to be labeled for country of origin now. The information is readily available, and adding it to the label should be very inexpensive. Enforcement can be done as part of the inspections of retail establishments that already occur. Labeling the consumer's t-bone is every bit as important as labeling the consumer's t-shirt.

A Matter of Equity

Cattle producers have suffered for the last several years from low prices. In addition, last year's weather disaster resulted in a loss to cattle producers of $900 million. Disaster assistance helped, but covered only $200 million of the losses. Lamb producers have also suffered, as lamb imports have steeply increased. Farmers Union feels strong that any assistance provided to farmers and ranchers for lost markets or weather-related disasters should be provided equitably to all livestock producers, whether they produce cattle, sheep, dairy, or pork.

Thank you for the opportunity to testify. We look forward to working with you on these and other critical issues impacting agriculture.