(Billings, Mont.) – R-CALF USA Region VII Director Eric Nelson gave testimony earlier today on behalf of the organization at a regional Farm Bill hearing in Ankeny, Iowa, conducted by the U.S. Senate Agriculture Committee.

The U.S. cattle industry is the largest single sector of U.S. agriculture, and the continued health of this sector is essential to creating strong, thriving rural communities all across the United States. Yet during the past decade, U.S. cattle producers have faced significant obstacles in both the domestic and international markets, and since 1994, more than 122,000 cattle ranches and farms have exited the beef cattle business. During that same period, the inventory of cattle and calves in the U.S. dropped from 101 million to just under 95 million.

Nelson testified that the Farm Bill should make progress in five key areas: 1) honest competition in the domestic livestock market; 2) animal health and safety; 3) consumer information; 4) international trade; and, 5) the development of initiatives to sustain a more prosperous and competitive cattle and beef sector. 

“As our sector faces many challenges, the Farm Bill should contain a separate cattle and beef chapter encompassing each of these issues,” Nelson told the panel.

Nelson’s entire written testimony is available at http://www.r-calfusa.com/ under the “Competition Issues” link, but during the hearing, he primarily focused on competition in the marketplace.

“Consolidation in the meatpacking industry has grown at an alarming rate over the past few decades, as have abusive contracting practices,” Nelson noted. “Concentration among meatpackers has more than tripled since the late 1970s, and today, just four beef-packing companies control more than 83 percent of the industry.

“While the meatpacking industry has seen dramatic consolidation, packers have also increasingly used non-traditional contracting and marketing methods that further erode the selling power of cattle producers,” Nelson explained. “Such methods include purchasing cattle more than 14 days before slaughter (packer-fed cattle), forward contracts, and exclusive marketing and purchase agreements.

“Together, the four largest packing companies employed such forms of ‘captive supply’ contracting methods for a full 44.4 percent of all cattle they slaughtered in 2002,” he continued. “That figure is for the whole year, but if packers acquire large numbers of supply in advance for one time frame, damage to the market can be done. As recently as this past February, there were nearly four full weeks without a cash market in my part of the world, as the packers had acquired enough inventory in advance through forward and formula contracts, with many cattle coming from Canada. When trade did resume, the market had lost nearly $10 per hundredweight.

“The impact of packer concentration and abusive contracting practices is also evident in the declining share of each beef retail dollar that actually reaches cattle producers, with the producer’s share of each retail dollar earned on beef being 47 cents in 2005, down from 56 cents in 1993,” Nelson pointed out. “Slaughter cattle I’m selling now are bringing about $1,000 per head and take about 16 months of feed and care to get them to that point. After a packer buys that animal for that $1,000, roughly in the next week, the packer and the retailers resell that same animal for around $2,100.

“The Farm Bill should ensure that antitrust and competition laws are effectively and vigorously enforced,” Nelson emphasized.

Nelson also discussed other issues in dire need of attention before the expected completion of the 2007 Farm Bill, especially if there are any delays in writing this specific legislation.

“First, there was a precipitous drop in U.S. fed-cattle prices that began in late January 2006 and continues today, despite widespread reports of tight cattle supplies and strong beef demand, demonstrating the need to immediately reauthorize Livestock Mandatory Price Reporting in accordance with recommendations recently made by the GAO (Government Accountability Office,” Nelson commented. “We support the recommendations proposed by Senators Grassley and Harkin and trust that transparency in the market can be improved by extending and strengthening Livestock Mandatory Price Reporting as quickly as possible.

“Second, the current import and volatile market situation highlights the need to implement the 2002 Mandatory Country-of-Origin Labeling (M-COOL) law as soon as possible,” he outlined. “It breaks my heart that as a producer, we can produce the best product in the world, and then have U.S. consumers buying Canadian, Japanese or Argentine beef, all the while paying top dollar thinking it’s U.S. beef, with importers pocketing huge profits.

“Next, we can immediately increase packer competition and limit concentration by passing Senate Bill 3519 (the Agriculture Small Business Opportunity and Enhancement Act), which would allow interstate sales of state-inspected meat and poultry.

“Finally, as we push to reopen our export markets to U .S. beef, we must remember that the customer is king, and allow individual packers to voluntarily test beef for BSE (bovine spongiform encephalopathy),” Nelson concluded. “The future for the cattle industry will be bright as long as needs of independent producers are looked out for.”

R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) represents thousands of U.S. cattle producers on domestic and international trade and marketing issues. R-CALF USA, a national, non-profit organization, is dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. R-CALF USA’s membership consists primarily of cow/calf operators, cattle backgrounders, and feedlot owners. Its members – over 18,000 strong – are located in 47 states, and the organization has over 60 local and state association affiliates, from both cattle and farm organizations. Various main street businesses are associate members of R-CALF USA. For more information, visit http://www.r-calfusa.com/ or, call 406-252-2516.