Statements on Introduced Bills and Joint Resolutions S325

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. GRASSLEY (for himself and Mr. FEINGOLD):

S. 325. A bill to amend the Agricultural Marketing Act of 1946 to increase competition and transparency among packers that purchase livestock from producers; to the Committee on Agriculture, Nutrition, and Forestry.

Mr. GRASSLEY. Mr. President, during the last Congress Senator FEINGOLD and I sponsored the Transparency for Independent Livestock Producers Act, or what we have generally referred to as the "Transparency Act". Today we are once again working together in a bipartisan fashion to re-introduce this important legislation.

As everyone knows, I introduced the packer ban this Congress because I want more competition in the marketplace. While I don't think packers should be in the same business as independent livestock producers, it's not the fact that the packers own the livestock that bothers me as much as the fact that the packers' livestock competes for shackle space and adversely impacts the price independent producers receive.

My sponsorship of the packer ban is based on the belief that independent producers should have the opportunity to receive a fair price for their livestock. The last few years have led to widespread consolidation and concentration in the packing industry. Add on the trend toward vertical integration among packers and there is no question why independent producers are losing the opportunity to market their own livestock during profitable cycles in the live meat markets.

The past CEO of IBP in 1994 explained that the reason packers own livestock is that when the price is high the packers use their own livestock for the lines and when the price is low the packers buy livestock. This means that independent producers are most likely being limited from participating in the most profitable ranges of the live market. This is not good for the survival of the independent producer.

This bipartisan legislation would guarantee that independent producers have a share in the market place while assisting the Mandatory Price Reporting system. The proposal would require that 25 percent of a packer's daily kill comes from the spot market. By requiring a 25 percent spot market purchase daily, the mandatory price reporting system, which has been criticized due to reporting and accuracy problems, would have consistent, reliable numbers being purchased from the spot market, improving the accuracy and transparency of daily prices. In addition, independent livestock producers would be guaranteed a competitive position due to the packers need to fill the daily 25 percent spot/cash market requirement.
The packs required to comply would be the same packs required to report under the Mandatory Price Reporting system. Those are packs that kill either 125,000 head of cattle, 100,000 head of hogs, or 75,000 lambs annually, over a 5 year average.

Packers are arguing that this will hurt their ability to offer contracts to producers, but the fact of the matter is that the majority of livestock contracts pay out on a calculation incorporating Mandatory Price Reporting data. If the Mandatory Price Reporting data is not accurate, or open to possible manipulation because of low numbers on the spot market, contracts are not beneficial tools for producers to manage their risk. This legislative proposal will hopefully give confidence to independent livestock producers by improving the accuracy and viability of the Mandatory Price reporting system and secure fair prices for contracts based on that data.

It's just common sense, when there aren't a lot of cattle and pigs being purchased on the cash market, it's easier for the Mandatory Price reporting data to be inaccurate or manipulated. The majority of livestock production contracts are based on that data, so if that information is wrong the contract producers suffer.

This legislation will guarantee independent livestock producers market access and a fair price. It will accomplish these goals by making it more difficult for the Mandatory Price Reporting System to be manipulated because of low numbers being reported by the packs. The Transparency Act is crucial legislation to guarantee livestock producers receive a fair shake at the farm gate and I am looking forward to working on this legislation in a bipartisan fashion.