Livestock groups eye Senate farm bill

Cattle Market & Farm Reports, Editorials
Nov 19, 2007

Commodity farmers get the lion’s share of focus in the farm bill, but there are several provisions in the Senate farm bill that could affect the way livestock producers do business.

Senate debate is stalled over how to accept amendments, but several senators are expected to offer proposals on the Senate floor as early as next week to tighten buyer-seller arrangements in the complex livestock industry.

The Senate farm bill includes a ban on packer ownership of livestock longer than 14 days before slaughter. But the Senate bill also has a provision that would allow private companies to forward contract with dairy producers. There also is a provision to create an office of special counsel on competition issues at USDA. Arbitration in livestock and poultry contracts would also be voluntary and could not be a required provision in such contracts.

Livestock producers and groups generally come down on different sides of these issues depending on whether they back open cash sales or argue that a producer and packer should be able to do business with limited government involvement.

Allan Sents, a Kansas feedlot manager and board member for the U.S. Cattlemen’s Association (USCA), said some key amendments are needed to clean up and clarify language in the 1921 Packers and Stockyards Act that courts have repeatedly interpreted broadly to justify packer business practices.

“To me, the clarification on the Packers and Stockyards Act is more import than the ban on packer ownership,” Sents said.

Senate Agriculture Committee Chairman Tom Harkin, D-IA, plans to offer one such amendment to clarify a “competitive injury.” It would redefine the legal requirements for a producer to show in court that they have been injured by the way packers are buying cattle. Now, a producer must show that he and several others were affected by a packer’s actions, instead of just his own operation.

“It’s just an untenable burden to be placed on a producer,” said Bill Bullard, R-CALF United Stockgrowers’s Association CEO.

R-CALF backs the Senate provisions on country-of-origin labeling, the packer ban, interstate shipment of state-inspected meat, and the establishment of an office of special counsel for livestock at USDA.

Further working on language in the packer laws, Sen. Charles Grassley, R-IA, and Sen. Jon Tester, D-MT, will offer a provision stemming from the Pickett versus Tyson court case. In that case, Tyson argued that acts violating the Packers and Stockyards Act were a justifiable business practice. The Grassley-Tester Amendment would state that claims of business justification would not be a legitimate defense for an unlawful practice.

Other senators keep offering a litany of amendments, but National Farmers Union President Tom Buis said it’s likely a lot of those amendments are just political posturing and will be eventually pulled. Buis said his group likes much of what is in the Senate livestock provisions, with the exception of the provisions allowing forward contracting in the dairy industry.

“We think it certainly could lead to further consolidation of the dairy industry,” Buis said.
One proposal creating a lot of debate is a proposed amendment by Sen. Mike Enzi, R-WY, that is meant at getting to the issue of captive supply of livestock. The amendment would restrict confidential one-on-one business deals with prospective buyers. Under the proposal, forward contracts would be prohibited for more than 40 head of cattle.

“The Enzi amendment is probably the most problematic provision out there,” said Colin Woodall, executive director of legislative affairs for the National Cattlemen’s Beef Association (NCBA). “The way it looks, it will probably be in the final Senate version.”
Packers have sent out letters saying the Enzi provisions would take away premiums and niche-marketing contracts, but producer groups such as R-CALF and USCA have denounced those letters as fear mongering.

Sents said he would like to hear the debate and merits of the Enzi amendment. Right now, Sents said cattle feeders often have to wait until sometime on Friday afternoon before the week’s cash trade really begins. Captive supplies by packers have created smaller trading windows and fewer cattle sold in negotiated markets, he said.

“I certainly favor the concept of the Enzi amendment,” Sents said.

Others argue that this focus on livestock is a holdover from price collapses nearly a decade ago and isn’t a reflection of the more recent strong markets in cattle and hogs.
“Why is it so wrong to have contracts now that we’re making money?” said Joy Philippi, a Nebraska pork producer and past president of the National Pork Producers Council.

The ban on packer ownership too may have a bigger ripple effect on pork than cattle, given the vertical integration in the pork industry. Philippi said contract-feeding hogs for packers is the way a growing number of younger producers are getting established in agriculture.

“What happens to the people who have good feeding contracts with packers?” Philippi said.

Restrictions on contracts and supply could generate a great deal of debate on the Senate floor. For instance, Harkin said he supports forward contracts as long as there are producer protections. Contracts should have provisions for resolving disputes between a buyer and seller, and there should be no mandatory arbitration clause in the contracts. Contracts must be transparent, and Harkin said there should be a window of time, 24 or 48 hours, to get out of the contract.

“If you have all of those in there, it would be fine,” he said.

The Senate bill has a provision for a new special counsel, but some senators want to broaden the authority in the language. Twenty industry groups ranging from NCBA and National Grain and Feed Association to the Grocery Manufacturers Association, the Pet Food Institute, Biotechnology Industry Association, and the U.S. Chamber of Commerce co-authored a letter earlier this week to express concern about an amendment by Grassley and Sen. John Thune, R- SD, on the special-counsel provisions.

Senators are trying to address the perceived ineptness of the USDA’s Grain Inspection Packers and Stockyards Administration. The agency, known as GIPSA, has received a great deal of criticism from Congress over the past two years after a USDA Office of Inspector General report in early 2006 found GIPSA had done very few actual livestock investigations over the previous six years yet had artificially inflated the numbers. Some members of Congress sought to even separate GIPSA’s Packers & Stockyards oversight from USDA. Still, NCBA resists the argument that a special counsel is needed.

“It’s just redundancy,” Woodall said. “It’s adding another layer of bureaucracy that we don’t think is going to do anything but slow things down ... It’s like having Kenneth Star on staff 24 hours a day and the sole purpose is to prosecute people.”

Starr was the special prosecutor who investigated the Clinton presidency, leading to President Clinton’s impeachment trial by Congress.