STATEMENT OF

THE AMERICAN FARM BUREAU FEDERATION

TO THE

SENATE AGRICULTURE, NUTRITION AND FORESTRY COMMITTEE

REGARDING

COUNTRY OF ORIGIN LABELING FOR MEAT AND PRODUCE

AND

PRICE REPORTING OF LIVESTOCK

Presented by

Harry L. Pearson

Indiana Farm Bureau, Inc.

May 26, 1999

The American Farm Bureau Federation is the largest general farm organization in the United States with more than 4.8 million member families in all 50 states and Puerto Rico. We appreciate the opportunity to come before your committee today to offer our views on country of origin labeling of meat products and the price reporting of livestock. We strongly support legislation that will require country of origin labeling for all products and for improved reporting of livestock prices.

Country of Origin Labeling

As trade increases and agricultural products both fresh and processed flow across international borders, U.S. consumers deserve to know where their food products originate.

Farm Bureau policy states:

"Imported products should be labeled at the distribution point and retail level as to the country of origin. Labels on imported products should state on the main display panel of the package that the product is imported in letters not less than one-half the size of the product name". Our policy goes on to state: "We support the establishment of a grown in the U.S.A. labeling program" and that "U.S. origin products should proudly display the American flag in a prominent position on the label." We also state in our policy that "All livestock entering the United States for any purpose should be permanently identified as to country of origin."

We strongly support the labeling of products, all the way to the retail outlet, as to its country of origin. We feel that consumers have the right to know where the food they are buying is produced in order to be able to distinguish American products from those produced in other countries. Consumers have confidence in America's farmers and ranchers. This allows them to buy products produced by their fellow Americans, and be assured that the products were produced in America.

Consumer surveys indicate that the majority of consumers want to know the origination of their meat products. We feel that it is important to change the current practice of allowing cattle to be imported into the U.S. and then, when processed, carry the USDA inspection label. We feel that this practice misleads the American consumer into thinking they are buying a U.S.-produced product when in fact it was imported into this country.

For example, imports of lamb to the United States have more than doubled in the last several years from seven to sixteen percent of consumption. Nearly 70 million pounds of lamb are now imported into the United States annually. Sheep industry analysts estimate that imported products will soon comprise over 20 percent of consumption. Some retail accounts that have sold American lamb now have both domestic and foreign products in the meat case without any differentiation. In addition, some foreign lamb today is graded by USDA and sold at retail to the consumer simply as USDA Choice lamb. Foreign lamb is frequently advertised as USDA-inspected lamb without mention of whether it is a domestic or imported product. Fruit and vegetable imports have seen this same type of import growth with little opportunity for consumers to identify domestically produced fruits and vegetables.

Farm Bureau also believes that it is important that beef produced in the U.S. should be able to proudly display the American flag and be labeled as such. Again, this gives consumers the knowledge they need to make decisions as to where their food is grown and produced.

While we feel that it is important to label most beef products, certain challenges arise in the case of ground beef. In some instances, a product may be from more than one country. We feel that a system could be adopted to make all parties comfortable with the labeling of ground beef. We urge members to work with the industry to come up with that system.

Because of the provisions of the World Trade Organization (WTO) we encourage all labeling to state the actual country of origin rather than just label the product "imported." We believe that the rules of the WTO prohibit using the words "imported" on products as an unfair trade barrier. Therefore, we urge that the actual producing country be stated on the label.

Legislation has been introduced in both the House and Senate which would amend the Federal Meat Inspection Act to require that imported meat and meat products be labeled so that U.S. consumers would be able to identify the country of origin at retail sales points. Under current law, labeling is permitted but not required. Not only would this legislation provide consumers with information they want, but it would also help bring U.S. labeling laws into uniformity with requirements of most of our trading partners around the world.

One concern Farm Bureau does have is how to label the product from stocker calves coming into the United States. We feel that the product from these cattle should be labeled as American products since a major portion of their life span is in the United States being fed on American feed products.

We realize that there are some concerns and unanswered questions related to labeling. We know that there will be costs involved, although we believe them to be somewhat minor (in spite of some outrageous cost estimates that have been released). We also realize that there will be challenges for U.S. producers in maintaining a high quality and safe product. But at the same time we look at it as an opportunity to highlight our products, both domestically and abroad. The bottom line is that we know there are challenges and possible pitfalls with labeling meat and perishable products as to their origins. But with the challenges come opportunities--opportunities we do not presently have available to us.

Consumers should have access to full information about the origin of their products. Country of origin labeling is simply a matter of informing the American consumer and helping assure consumer confidence in the products they choose to purchase. Enhancing the market opportunities for domestic meat, meat products and all agricultural commodities by requiring labeling of imports is critical to the agriculture industry.

We feel that legislation requiring labeling not only will have a positive impact upon American producers, but also upon American consumers.

Price Reporting for Livestock

The extremely low prices we have seen for both pork and beef in the past two years makes this an issue that needs to be resolved, for both producers and the meat industry.

The challenge of concentration in the meat packing industry has been at the forefront of issues concerning Farm Bureau members. In fact, recently, Farm Bureau held a conference in St. Louis where concentration, both within the feed and livestock sectors, was one of the main topics of discussion. As you know, with the recent mergers and acquisitions within the meat packing industry, only three major packinghouses exist for the beef industry. These three packers account for over 80 percent of all beef cattle slaughter. The four largest packers in the hog industry account for 57 percent of all hogs processed. There is growing sentiment that there needs to be increased accountability between packers and producers.

We are very concerned that producers be able to have access to packers within a reasonable distance of their operation. It is also important to producers that they have access to the prices being paid by these packers for the animals that they are buying. Since agricultural producers are usually put in the position of being "price takers," it becomes of utmost importance for them to have the best information possible on the actual prices being paid for their livestock. These are some of the reasons Farm Bureau is so supportive of legislation that would provide producers with accurate and timely price reporting.

However, while we do want to see legislation on price reporting, we feel that this issue is too important to rush into. We appreciate the efforts that have been put forth by the National Cattlemen's Beef Association, the National Pork Producers Council, and the American Sheep Industry Association to work within their organizations and membership to develop language on price reporting that will translate into meaningful information to producers. But at the same time, it is vital that all of the major farm organizations have input on the development of this legislation. All of the groups are trying to work together to highlight all of the factors that need to be considered in this important milestone in the meat industry.

There are production and processing practices unique to each sector of the meat industry which make this a more time consuming process. Due to these unique factors within in each segment, we have to work out the best methods of reporting price and volume of livestock in each sector of the industry. Then we need to work to put all of this information together so that the legislation that is finally put forth will cover all of the aspects of the meat industry. We also want to ensure that the information disseminated to the producer is user-friendly.

Farm Bureau policy is clear on the price reporting issue. "Livestock packers who process more than 5 percent of the national daily slaughter should be required to report all cash and contract prices and terms of sale to the Federal Market News Service." Our policy also states that we seek expanded reporting details on livestock imported into the U.S., the number of animals sold under contracts and the terms of those contracts, and reporting of export sales of meat and poultry products.

Since an increasing number of livestock, both beef and pork, are sold under some form of contract, it is extremely important to us that information related to volume, prices paid, and the terms of these contracts be reported to the public in an accurate and timely fashion. At the same time, most of these contracts are linked to cash prices reported. Reporting cash prices in an accurate and timely manner is critical. To accomplish this, producers need to know what actual plant procurement costs are, not just the open market price being paid that day.

Since fewer and fewer animals are being bought on the open market system, plant procurement costs would give producers a much better idea what the actual value of their animals are to the packing plant. By having this information producers will be able to make a much more informed marketing decision. There is evidence to suggest, especially after the extremely low prices experienced in the pork industry last fall that plant procurement costs were actually much higher than the open market prices being reported.

Also related to the low pork prices experienced this past fall is the matter of having an improved farm-to-retail price spread developed. Many producers felt cheated by the prices they were receiving in relation to the retail price being reported by USDA. The fact is that no one actually knows what the real price spread was during this time. But it was obvious that if a better formula were developed that everyone--producers, processors, and consumers--would benefit from having information that more accurately reported the farm-to-retail spread prices. Therefore, any price reporting legislation must contain provisions that will lead to the development of a better farm-to-retail price series.

As indicated above, all of the groups involved in the meat industry are concerned with this issue and are working on developing legislation that not only addresses all aspects of price reporting, but that can be supported by all segments of the meat industry.

We appreciate the leadership you and your committee has given on these important issues. We also appreciate the time you have given us today to make our views known on some topics that affect a vast number of our membership on a daily basis. I will respond to any questions at the appropriate time. Thank you.