Order Code IB10063
CRS Issue Brief for Congress
Received through the CRS Web
Animal Agriculture: Issues in the 107th Congress
Updated March 28, 2002
Jerry Heykoop
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Industry Issues
Concentration and Structure
Government Response
In Congress
Farm Bill
Economic Assistance
Farm Bill
Mandatory Price Reporting
Pork Checkoff
Sheep Industry
Trade Issues
Russia (Poultry)
Europe (Beef)
Country-of-Origin Labeling
Farm Bill
Environmental Issues
Farm Bill
Animal Health Issues
“Mad Cow” Disease
Foot-and-Mouth Disease
Humane Slaughter
Farm Bill
LEGISLATION
Competition, Antitrust, and Industry Structure
Environment
Animal Health
FOR ADDITIONAL READING

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Animal Agriculture: Issues in the 107th Congress
SUMMARY
A variety of animal agriculture issues,
The FY2001 USDA appropriations (P.L.
including prices, the impact of consolidation in
106-387) contained a mandatory price report-
the meat production/packing industry, trade,
ing provision that requires large meat packers
and the environmental impacts of large feed-
to report prices they pay for cattle and hogs,
lots, continue to generate interest Congress.
among other provisions. The provision was
implemented on April 2, 2001, but problems
The farm bill contains several key provis-
arose with reporting of prices. USDA has
ions that would affect animal agriculture,
implemented changes to fix those problems
including concentration, disaster assistance,
and increased the frequency of reporting.
and country-of-origin labeling. Two of the
more contentious issues involve packer owner-
The Pork Checkoff Program was rein-
ship of livestock and environmental provisions.
stated on February 28, 2001, in an agreement
reached between USDA and the National Pork
The Senate bill would ban most packer
Producer’s Council. Former Secretary
ownership of livestock beyond 14 days prior to
Glickman had ordered the checkoff canceled
slaughter. The House bill does not contain
after it was voted down in a disputed producer
similar provisions and House conferees have
referendum.
expressed opposition.
Outbreaks of foot-and-mouth disease and
On livestock-related environmental is-
persistent findings of mad cow disease in
sues, key differences include the period of
Europe have deepened concerns about the
authorization. The House provides authoriza-
United States’ ability to prevent these diseases
tion through FY2011, while the Senate pro-
or eradicate them should an outbreak occur.
vides authorization through FY2006. The
House bill primarily reauthorizes existing
Russia banned U.S. poultry imports as of
programs, usually at lower funding levels than
March 10, 2002. The ban stems from Russian
the Senate bill, and enacts few new programs,
concerns over antibiotics in feed and the use of
while the Senate bill makes more numerous
chlorinated water during processing. Disputes
and significant changes to existing programs
continue with the European Union over its
and to conservation policies, and also creates
barriers to U.S. meat and poultry imports
many more new programs.
despite a WTO ruling that they violated the
WTO agreement.
Concerns about the impact of consolida-
tion in the livestock industry and the agricul-
In December 2000, the Environmental
tural sector overall, have spurred legislative
Protection Agency proposed new permitting
interest in remedies. The House farm bill
controls that would apply to concentrated
would set up an interagency commission to
animal feeding operations. The proposal
study concentration and competition within
includes the objective of preventing discharges
agriculture, while the Senate farm bill would
from manure-storage lagoons, and limiting the
restrict packer ownership of livestock.
spreading of manure to protect waterways.
Final regulations are due December 15, 2002.

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MOST RECENT DEVELOPMENTS
The House passed their version of the farm bill (H.R. 2646) on October 5, 2001, and
the Senate completed action on February 13, 2002 (H.R. 2646 as amended). The House bill
contains several provisions dealing with animal agriculture including new credit provisions
during (economic) emergencies and animal handling procedures. The Senate bill contains
similar animal handling provisions, but does not contain the emergency credit provisions.
Additionally, the Senate version contains country-of-origin labeling requirements for meats,
and restricts packer ownership or control of livestock. Both bills also contain provisions to
provide funding for livestock producers during natural disasters. Conferees held their first
meeting on March 13.
On March 21, Senator Roberts introduced S. 2040 to provide emergency agricultural
assistance to producers of the 2002 crop in the event the farm bill (H.R. 2646) is not passed
in time to cover 2002 crops. S. 2040 would allow $500 million of funds of the Commodity
Credit Corporation to provide livestock feed assistance to livestock producers affected by
disasters during calendar year 2001 or 2002.
As of March 10, Russia has banned imports of U.S. poultry. The ban stems from
Russian concerns of antibiotics in poultry feed and the use of chlorinated water during
processing.
BACKGROUND AND ANALYSIS
In 2000, U.S. farmers received $99.5 billion from the sale of animal products, about 51%
of all farm cash receipts, approximately the same as reported for 1999. For 2001, forecasts
are $108.5 billion and 53%, according to the U.S. Department of Agriculture’s (USDA)
Economic Research Service
M e a t a n d P o u l t r y P r o d u c t i o n a n d P r i c e s
(ERS).
B e e f
2 0 0 2
2 0 0 1
2 0 0 0
1 9 9 9
P r o d u c t i o n ( b i l l i o n p o u n d s )
2 5 . 6
2 6 . 1
2 6 . 8
2 6 . 4
F e d s t e e r s ($ /h u n d r e d p o u n d s )
$ 7 2 - 7 7
$ 7 2
$ 7 0
$ 6 5
According to ERS, the
F e e d e r s t e e r s ( $/ h u n d r e d p o u n d s )
$ 8 3 - 8 8
$ 8 8
$ 8 6
$ 7 6
cattle inventory on January 1,
P e r c a p i t a c o n s u m p t i o n ( p o u n d s )
6 7 . 2
6 8 . 2
6 9 . 5
6 9 . 1
2002, declined another 1% from
R etail price ($/pound)
$ 3 . 3 1
$ 2 . 9 0
$ 2 . 7 5
$ 2 . 6 1
a year earlier, and nearly 7%
P o r k
from the 1996 cyclical peak, with
P r o d u c t i o n ( b i l l i o n p o u n d s )
1 9 . 2
1 9 . 1
1 8 . 9
1 9 . 3
inventories expected to decline
M a r k e t p r i c e ($ / h u n d r e d p o u n d s )
$ 4 3 - 4 6
$ 4 6
$ 4 5
$ 3 4
for at least the next 2 years. The
P e r c a p i t a c o n s u m p t i o n ( p o u n d s )
5 1 . 7
5 1 . 6
5 2 . 5
5 3 . 9
R etail price ($/pound)
$ 2 . 7 1
$ 2 . 6 0
$ 2 . 5 8
$ 2 . 4 2
United States is expected to
S h e e p
export nearly 1.5 billion pounds
P r o d u c t i o n ( m i l l i o n p o u n d s )
1 9 6
2 2 6
2 3 4
2 4 8
of pork in 2002, compared with
F a r m p r i c e ( $ / h u n d r e d p o u n d s )
$ 7 5
$ 7 2
$ 7 9
$ 7 6
about 1.6 billion in 2001. At the
B roilers
beginning of last year, the United
P r o d u c t i o n ( b i l l i o n p o u n d s )
3 1 . 9
3 1 . 1
3 0 . 5
2 9 . 7
States faced very strong demand
M a r k e t p r i c e (¢ /p o u n d )
5 7 - 6 1 ¢
5 9 . 1 ¢
5 6 . 2¢
5 8 ¢
P e r c a p i t a c o n s u m p t i o n ( p o u n d s )
7 7 . 4
7 6 . 4
7 7 . 4
7 7 . 0
from Japan for pork products
T u r k e y
ahead of the imposition of its
P r o d u c t i o n ( b i l l i o n p o u n d s )
5. 6
5 . 6
5 . 4
5.3
Safeguard (a pricing mechanism
M a r k e t p r i c e (¢ /p o u n d )
6 4 - 6 9 ¢
6 6 . 3 ¢
7 0 . 5 ¢
6 9 ¢
to protect domestic producers
P e r c a p i t a c o n s u m p t i o n ( p o u n d s )
1 7 . 9
1 7 . 9
1 7 . 8
1 8 . 0
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from a rapid rise in imports). Sales also were boosted when disease issues —foot-and-mouth
disease (FMD) in March and Bovine Spongiform Encephalopathy (BSE) in September—
appeared throughout the year. If more BSE cases are discovered in Japan, and beef
consumption continues to decline as a consequence, a more favorable scenario for U.S. pork
exports likely would result in 2002. Growth in broiler exports in 2002 is expected to slow
from 15% in 2001 to 3% in 2002 as the world economy slows and the dollar remains strong.
The inventory of all sheep and lamb fell in 2002, continuing the long downturn with decreased
production and increased imports.
Industry Issues
Concentration and Structure
A continuing trend toward consolidation within agriculture has generated legislative
interest in the effect of concentration and consolidation on U.S. agriculture. Strong interest
by producer groups and policy makers continues into the changing structure and business
methods of the livestock industry, including consolidation of production and processing into
fewer and larger operations, more vertical integration (i.e., ownership or increased control
of more than one phase of production and marketing by a single firm), and the gradual shift
from mainly open cash markets to private contracts or other marketing agreements between
buyers and sellers. At issue are the impacts —positive and negative— on traditional
producers, rural economies, consumer choices and prices, and the environment and the role,
if any, that government should play.
Many producers believe increasing concentration and other changes have resulted in a
less open market environment and contributed to the lower prices they have been receiving.
That is, as meat packers acquire more of their slaughter needs via contracts or marketing
agreements, they purchase fewer animals on the spot market, thus reducing spot prices.
USDA and other analysts generally believe that other factors, notably imbalances in supply
and demand, are much more consequential. Additionally, analysts have said that contracts
provide more stable prices than the spot market, giving producers further incentives to enter
into contracts.
Economists explain that structural changes are occurring as production and processing
firms become larger in order to capture lower per-unit costs when operating at or near full
capacity. They argue that vertical coordination and the use of advance marketing
arrangements are a reflection of today’s agricultural markets, which are shifting from the
production of a few homogenous commodities without a particular market in mind to the
creation of a wider variety of specific, consistently high-quality consumer products for
specific markets.
Negative impacts of consolidation include potential environmental impacts and several
related issues. The continued trend toward fewer but larger operations, coupled with greater
emphasis on more intensive production methods and specialization, has concentrated more
manure and other animal waste constituents within some geographic areas, according to EPA.
Others have discussed quality-of-life issues related to both the loss of small operations
(including the loss of traditional lifestyles) and the gain of large operations (including air
quality issues).
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The hog industry especially has been consolidating rapidly in recent years. At the packer
level, the four largest firms’ share of hog slaughter reached 56% in 1999, compared with 40%
in 1990. In 1997, 64% of all hogs were marketed through some form of forward sales
arrangement between producers and packers, but less than 10% of all hogs involved entire
or partial packer ownership.
According to ERS, larger producers (5,000+ head) currently account for nearly three
fourths of the pig crop, compared with just over a fourth in 1994. The trend toward larger
facilities and increasing share of production by those larger facilities, may be a factor in more
stable hog prices. To expand production, the large producers face a more complicated
process than in the recent past and the process is much more complicated than for the smaller
producers. Expansion processes now include securing large-scale financing, obtaining
building and waste management permits from State and local authorities, and hiring and
training staff. In contrast, 15 to 20 years ago many smaller producers maintained multi-use
buildings for rapid re-population of a hog herd when returns turned favorable. Necessary
construction was accomplished without complicated procedures needed to manage waste.
Family labor typically provided adequate supplies of skilled herdsmen. The factors that affect
expansion patterns today are likely those that are muting the peaks and valleys of the hog
cycle.
The poultry industry has been almost entirely vertically integrated for many years, and
the pork industry is becoming more so. In the cattle sector, the four largest beef packers
accounted for 70% of all cattle slaughtered in 1999, compared with 59% in 1990. However,
structural change in the beef industry has not been as dramatic in recent years as it has been
for the hog industry.
Government Response. Government-sponsored studies have been inconclusive on
the relationship between agribusiness consolidation and farm prices. One, Concentration in
Agriculture: A Report of the USDA Advisory Committee (June 1996), confirmed widespread
producer distrust of cattle pricing and procurement by packers. Among its recommendations
were improved market data collection (to reflect modern marketing practices), better access
to the data by all segments of the industry, and more vigorous enforcement of existing
antitrust laws.
USDA has undertaken a number of actions intended to address concentration and to
promote competition including (1) enhanced reporting of livestock prices and other marketing
data, (2) expanded investigations of procurement and pricing practices in the fed cattle, hog,
and lamb sectors, and of poultry companies’ contracts with growers, and (3) an overhaul of
the Grain Inspection, Packers and Stockyards Administration (GIPSA), to strengthen its
ability to investigate and prosecute anti-competitive practices under the Packers and
Stockyards Act (P&S Act).
In Congress. In the 107th Congress, the Senate Agricultural Appropriations
Subcommittee held a hearing on May 17, 2001, on agricultural concentration. The Senate
Agriculture Committee held hearings in the 106th Congress on concentration in agriculture,
including the livestock industry, on January 26 and July 27, 1999, and again on February 1
and April 27, 2000. The House Agriculture Committee held a similar hearing on February
11, 1999. Two Senate Judiciary Subcommittees held hearings on September 25 and
September 28, 2000.
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A report by the General Accounting Office (GAO) determined that GIPSA lacks the
staff, the budget, and the expertise to investigate anticompetitive behavior in the livestock
industry.1 Among GAO’s recommendations were calls for an earlier integration of attorneys
in the planning and review of investigations, and for closer consultations between GIPSA,
DOJ, and FTC during investigations. A proposal to require USDA to implement, within one
year, GAO’s recommendations for improving the administration of the P&S Act was signed
into law on November 9, 2000 (The Grain Standard and Warehouse Improvement Act of
2000; P.L. 106-472).
Farm Bill. The House bill would set up an interagency task force to study competition
and concentration in agriculture, and authorizes appropriations for GIPSA to enhance
investigations into competition issues. The Senate bill contains provisions that would: (1)
Allow that mandatory arbitration clauses in livestock contracts are non-binding and allow for
dispute settlement through other legal means in addition to arbitration. (2) Ban packer
ownership or control (to such an extent that the producer is no longer “materially
participating” in the production) of livestock for more than 14 days prior to slaughter. The
ban does not apply to producer-owned cooperatives, or to producer-owned packers that
annually slaughter less than 2% of livestock slaughtered in the United States. (3) Extend
GIPSA authority to include livestock production contracts. Currently, GIPSA protects
broiler farmers who grow under contract and livestock producers who sell directly to packers,
but it does not have authority over livestock producers who grow under contract. (4) Allow
contract producers to discuss the contract with advisors and enforcement agencies even if the
contract contains a confidentiality clause.
Economic Assistance2
Various emergency supplemental acts in recent years have authorized ad hoc assistance
for livestock farmers when on-farm feed or forage is damaged or destroyed by a natural
disaster (Livestock Assistance Program) or to replenish herds when a natural disaster causes
widespread livestock mortality (Livestock Indemnity Program). Programs generally are
funded through the borrowing authority of USDA’s Commodity Credit Corporation (CCC).
The FY2001 agriculture appropriations act (P.L. 106-387) provided $490 million for calendar
year 2000 livestock losses. The FY2002 agricultural appropriations act (P.L. 107-76)
authorizes loans to horse breeders to assist them for losses suffered as a result of mare
reproductive loss syndrome.
Farm Bill. The House bill would permanently authorize livestock assistance, subject
to annual appropriations, and at the discretion of the Secretary of Agriculture. The Senate
bill would require USDA to: (1) Implement a program to provide feed assistance to livestock
producers affected by disasters, subject to annual appropriations. For FY2003-8, $500
million is authorized to be appropriated. (2) Use $500 million of CCC funds to make
payments for livestock losses in 2001 in a county that has received emergency designation by
the President or Secretary after January 1, 2001.
1 U.S. Government Accounting Office. RCED-00-242: Packers and Stockyards Programs: Actions
Needed to Improve Investigations of Competitive Practices. September 2000.
2 CRS contact: Ralph Chite 7-7296.
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Mandatory Price Reporting3
Mandatory price reporting (MPR) for large packers was incorporated by conferees into
the FY2000 USDA appropriations law (P.L. 106-78, October 22, 1999) after a long period
of intensive negotiations with meat packing companies and livestock producers to design a
comprehensive price reporting law acceptable to both segments of the industry.
On April 2, 2001, USDA’s Agricultural Marketing Service (AMS) implemented MPR.
The new system replaced the previous voluntary reporting system that had been in place for
many years. MPR was intended to address the concerns of some livestock producers about
low prices, increasing concentration in the packing and processing sector, and less public
marketing systems brought about by increased use of contracting and private agreements.
MPR requires the reporting of market information by meatpackers who slaughter an
average of 125,000 cattle, 100,000 hogs, or 75,000 lambs per year and by importers with
annual imports of 5,000 tons of lamb. USDA in turn must publish frequent, detailed reports
on these transactions.
Packers and importers are required to report to USDA the details of all transactions
involving purchases of livestock, domestic and export sales of boxed beef cuts, sales of
domestic and imported boxed lamb cuts, and sales of lamb carcasses. Market news reports
that will be new under MPR include reports covering the prior day swine market; forward
contract and formula marketing arrangement cattle purchases; packer-owned cattle and sheep
information; sales and purchases of imported boxed lamb cuts; and live lamb premiums and
discounts.
On May 14, 2001, AMS discovered a technical error in the computer program for MPR.
The error affected the cutout values for beef carcasses and primals (the major components
of carcasses). USDA aggregates individual meat cuts prices to construct a carcass value.
Due to the programming error, the calculated carcass values were incorrect. Individual meat
cuts reported by packers were reported accurately and were not subject to the programming
error. On May 18, Secretary Veneman appointed a Review Team headed by Keith Collins,
USDA’s chief economist, to evaluate measures in place to ensure the integrity of information
reported under MPR and to assess the economic impact the misreported data may have had
on livestock producers. As part of its activities, the Review Team met with representatives
of the livestock and meat packing industries, Congress, AMS, and contractor officials.4
USDA announced on July 2, 2001, that it had begun to implement changes
recommended by the Review Team to improve the integrity of MPR. Additionally, on August
3, USDA announced a new confidentiality rule to replace the 3/60 rule. The new “3/70/20
rule” took effect August 20, and contains the three following provisions: Over a 60-day
period (1) at least three entities have to submit data at least 50% of the time; (2) no one entity
can account for more than 70% of the data for a report; and, (3) the same firm cannot be the
only reporting entity more than 20% of the time.
3 For additional information, see CRS Report RS20079, Livestock Mandatory Price Reporting, and
AMS’ MPR site at: [http://www.ams.usda.gov/lsg/mncs/LS_MPR.htm].
4 The Review Team’s Report can be viewed at: [http://www.usda.gov/oce/mp-report/index.htm].
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Pork Checkoff
The Pork Checkoff program is funded by assessments collected from producers when
hogs are sold and on imports. The funds collected are used for pork promotion, research, and
consumer information. USDA held a referendum on continuation of the program during the
period August 18 - September 21, 2000. Producers who owned and sold at least one pig over
the period August 18, 1999 - August 17, 2000, were eligible to vote in the referendum, as
were those who imported pigs, pork, or pork products during that time period.
The results of the referendum were 14,396 (45%) for, and 15,951 (50%) against
continuing the checkoff program, with 5% of the ballots invalidated. On January 11, 2001,
Secretary Glickman issued a statement: “This outcome demonstrates that the Pork Checkoff
Program does not have the support of the producers it serves and therefore cannot fulfill its
stated purpose. Accordingly, I am directing USDA’s Agricultural Marketing Service to
prepare and issue a final rule to terminate the order and the program conducted under it.”
On January 12, 2001, the National Pork Producers Council (NPPC) —an industry
organization funded by the checkoff program— filed suit seeking a temporary order
restraining termination of the program. The injunction request contended USDA acted
unlawfully when it held a binding referendum and that the Secretary had no authority to call
for the vote. The U.S. District Court for Western Michigan granted a Temporary Restraining
Order on January 19, prohibiting USDA from publishing a rule to end the pork checkoff
program based on the referendum. In accordance with the court order, the checkoff remained
in effect, with a hearing on the fate of the checkoff scheduled tentatively for March 16. On
February 28, 2001, USDA announced a settlement that would continue the Pork Checkoff.
In light of the settlement reached, the court hearing scheduled for March 16 was canceled.
Under the settlement, certain program restructuring was required. The changes,
effective immediately, were to ensure the separation of the National Pork Board (which is
responsible for the collection, distribution and program accountability for the pork checkoff
in the areas of promotion, research and consumer information) and the NPPC, and to make
the program more responsive to concerns of pork producers.
The Pork Board will have approximately 2 years to demonstrate to producers and
importers the value of the checkoff program to the industry. USDA will conduct a survey by
June 2003, to determine whether 15% of producers and importers are in favor of conducting
a referendum to decide continuation of the checkoff program. If the required number of
producers and importers request a referendum, the referendum would then be held within one
year.5
An amendment by Congresswoman Marcy Kaptur was adopted at the June 14, 2001,
Appropriations Committee markup of the FY2002 agricultural appropriations bill (H.R.
2330). The provision prohibits USDA from using appropriated funds to administer checkoff
programs that have not been approved by producers, and aimed to prevent USDA’s
administration of the pork checkoff. It deals with some producers’ and lawmakers’
5 Additional information about the settlement and related issues is available at:
[http://www.ams.usda.gov/lsg/mpb/pork.htm].
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frustrations over USDA reinstating the assessment even though pork producers had voted to
end the program. No similar provision was contained in the Senate version (S. 1191), but the
measure was adopted in conference (P.L. 107-76, Section 739).
Sheep Industry
Acting on a Section 201 petition6 filed by the American Sheep Industry Association
(ASIA) and others, the International Trade Commission (ITC) on February 9, 1999, found
that increased lamb meat imports were a substantial cause of the threat of serious injury to
the U.S. lamb meat industry. Subsequently, President Clinton announced, on July 7, 1999,
an import relief package for the U.S. industry that included both a 3-year, $100 million
initiative to help the industry improve productivity, and tariff-rate quotas on lamb meat
imports from Australia and New Zealand (which account for 99% of such imports).
Following complaints filed by the two countries, a WTO dispute panel ruled on December 6,
2000, that the United States had violated the WTO’s safeguard provision by improperly
attributing, to the imports, the economic injury that was caused by other factors. On May 1,
2001, a WTO appellate body turned aside a U.S. appeal. The Bush Administration on August
31, 2001, then announced that it would end the tariff-rate quota safeguard on November 15,
2001. As part of the agreement with New Zealand and Australia, the United States is to
provide the U.S. lamb industry with up to $42.7 million in assistance (in addition to the $100
million) through FY2003 to help the U.S. industry continue to adjust to import competition.7
Trade Issues8
U.S. as Percent of World Market
The United States is the world’s
Year 2001
50%
leading beef consumer, producer, and
importer and the second leading exporter.
40%
The United States is the third leading pork
consumer, producer, importer, and
30%
exporter. The United States is the leading
consumer and producer of poultry meat and
20%
dominates the export market with 46% of
10%
total world exports, while accounting for
less than 1% of total imports.
0%
Production
Consumption
Exports
Imports
Beef
Pork
Poultry
6 Section 201 of the Trade Act of 1974 permits the President to grant temporary import relief by
raising import duties or imposing nontariff barriers on goods entering the United States that injure or
threaten to injure domestic industries producing like goods.
7 Further information on the Lamb Meat Adjustment Assistance Program can be found on the Farm
Service Agency’s website at: [http://www.fsa.usda.gov/dafp/psd/lamb.htm].
8 CRS contacts: Charles Hanrahan 7-7235, and Geoff Becker 7-7287.
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Russia (Poultry)
In early March 2002, Russia announced it was banning imports of U.S. poultry. Russia
said it was concerned about the use of antibiotics and chlorinated water in the production and
processing of U.S. birds. U.S. officials say there is no scientific justification behind the ban.
USDA, USTR, and FDA officials are meeting with Russian officials to reach a settlement.
Poultry exports to Russia account for approximately 50% of total U.S. poultry exports.
Europe (Beef)9
In 1985 (effective 1989), the European Union (EU) banned the import of U.S. beef
produced with hormones. In 1997, the WTO ruled in favor of the United States that the EU
cannot ban, without scientific justification, beef produced with hormones. The WTO
authorized U.S. retaliation of $117 million and the EU offered to compensate the United
States by enlarging the 20,000 tonne quota for non-hormone treated (NHT) beef in lieu of
lifting the ban. The United States, however, has maintained that compensation, unless
contingent on removing the ban, is unacceptable.
Country-of-Origin Labeling10
Federal law requires most imports, including many food items, to bear labels informing
the “ultimate purchaser” of the country of origin. The U.S. Customs Service, which
administers and enforces this requirement, generally defines the “ultimate purchaser” as the
last U.S. person receiving the article in the form in which it was imported. So, if articles
arrive at the U.S. border in retail-ready packages —including food products (e.g., a can of
Danish ham, a slab of Dutch cheese, or a box of English candy)— each must carry such a
mark. However, if the article is destined for a U.S. processor or manufacturer where it will
undergo “substantial transformation” (as determined by Customs), then that processor or
manufacturer is considered the ultimate purchaser.
Expanded labeling requirements continue to attract attention for a number of reasons.
One is that they are viewed by some as a way to help U.S. producers dealing with low farm
prices. Also, some perceive that food products from certain countries might pose greater
health risks. Proponents contend additional country labeling requirements would enable
consumers to know the source of retail food offerings and include that knowledge in selecting
purchases.
Opponents counter that country-of-origin labeling bears no relation to food safety and
would not succeed in raising commodity prices paid to U.S. producers, as proponents hope.
They argue it would impose excessive and costly regulatory burdens on retailers, increase
consumer prices, be difficult to enforce, and —by imposing new non-tariff trade barriers—
9 Please see CRS Report RS20142, The European Union’s Ban on Hormone-Treated Meat, and the
Electronic Briefing Book on Agricultural Policy and the Farm Bill U.S.-EU Meat Hormone Dispute,
at: [http://www.congress.gov/brbk/html/ebtra15.html]. USDA’s Foreign Agricultural Service web
site contains a primer on beef hormones at: [http://www.fas.usda.gov/itp/policy/hormone2.html].
10 Please see CRS Report 97-508, Country-of-Origin Labeling for Foods: Current Law and
Proposed Changes.
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undermine ongoing efforts to reduce other countries’ trade barriers and expand international
markets for U.S. products.
In the 106th Congress, a number of bills aimed at expanding country labeling
requirements for meats and other agricultural products were introduced, and both the House
and Senate Agriculture Committees held hearings on the issue. No mandatory legislation was
enacted, but language included in the conference report to the FY2000 USDA appropriations
(P.L. 106-78) directed the Secretary of Agriculture to “promulgate regulations defining which
cattle and fresh beef products are ‘Products of the U.S.A.’ This will facilitate the
development of voluntary, value-added promotion programs...”
On September 8, 2000, the National Cattlemen’s Beef Association (NCBA), the
American Farm Bureau Federation, the Food Marketing Institute, the National Meat
Association, and the American Meat Institute(AMI) petitioned USDA for regulations
establishing a voluntary certification program for U.S.-produced beef. On August 7, 2001,
FSIS published in the Federal Register an advance notice of proposed rulemaking, requesting
comments on the need for regulations to clarify the definition of “United States cattle” and
“United Sates fresh beef products” for labeling purposes. Comments were due by October
9, 2001.11
Farm Bill. The House bill would require retailers (except food service establishments)
to inform consumers of the country of origin of all fresh fruits and vegetables through a label,
stamp, mark, placard, or other sign at the final point of sale. Violators are subject to civil
penalties of $1,000 on the first day and $250 on each succeeding day of a violation. The
Senate bill would require retailers to provide similar types of country-of-origin information
not only for fresh produce, but also for red meats, peanuts, farm-raised fish, and wild fish and
shellfish. The Senate version also includes a separate provision prohibiting the use of USDA
quality grade labels on imported carcasses, meats, or meat food products. Currently, both
domestic and imported meats and meat products are eligible to receive USDA quality grades
as a fee-based service.
Environmental Issues12
Impacts of animal production practices on the environment, both on and off the farm,
have come under more scrutiny in recent years. Industry leaders acknowledge the need to
protect the environment, but seek assurances that any policy changes will be based on sound
scientific evidence and emphasize flexible, site-specific solutions over (in their view)
excessive, costly, or inflexible regulations.
The livestock industry has undergone dramatic changes in the past 20 years. The
continued trend toward fewer but larger operations, coupled with greater emphasis on more
intensive production methods and specialization, has concentrated more manure and other
11 For more information on the proposal, and on current FSIS labeling rules, see:
[http://www.fsis.usda.gov/oa/background/usabeef.htm].
12 CRS contacts: Jeff Zinn 7-7257, and Claudia Copeland 7-7227.
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animal waste constituents within geographic areas. In addition, more and more of the larger
livestock facilities are concentrated in areas where the available land cannot properly
assimilate all the manure, and excessive amounts of waste are either spread on fields or
stored, causing chemical and nitrogen runoff into lakes, streams, and estuaries, and resulting
in fish kills and other problems.
In response to public concern about contamination of rivers, lakes, streams, coastal
waters, and ground water from livestock manure and other animal wastes from livestock
operations, EPA and USDA developed the Unified National Strategy for Animal Feeding
Operations (AFOs) in March 1999. The strategy includes the national goal that all “AFOs
should develop and implement technically sound, economically feasible, and site-specific
comprehensive nutrient management plans (CNMPs) to minimize impact on water quality and
public health.”
Under federal clean water law, large confined animal feeding operations (CAFOs) are
regulated as point sources, in a similar manner to industrial sources of pollution and must
obtain permits in order to discharge pollutants into U.S. waters. Existing rules to limit such
discharges were issued in the mid-1970s. As part of the 1999 AFO Strategy, on December
15, 2000, EPA proposed water pollution regulations to revise the existing rules for CAFOs.13
The proposed changes focus primarily on manure runoff, containment, and disposal. (At
present, a CAFO generally is defined as having 1,000 animal units, a threshold that 11,200
operations exceed according to the most recent Census of Agriculture, collected in 1997.)14
On March 26, 2001, EPA extended the public comment period through July 30, 2001.
Throughout March 2001, EPA held eight public meetings across the country to provide
additional information and encourage public comment on the proposal. EPA provided the
additional comment opportunity based on comments received at these meetings asking for
more time to study and comment on the proposed Clean Water Act permitting requirements
and CAFO definitions. EPA is under a court order to take final action on these regulations
by December 15, 2002. For newly defined CAFOs, permits will not be required until three
years after (January 2006) final regulations are published. Once the proposed regulations are
final, the new requirements come immediately into effect for new or reissued permits.
EPA’s proposal currently includes two options regarding the definition of a CAFO.
Under the first option, livestock operations would be subject to a three-tier structure. The
highest tier would include all operations with more than 1,000 AU. There would be revised
13 For more information on EPA’s proposal, please visit its web site at:
[http://www.epa.gov/npdes/afo/].
14 Under the existing permit rules, a CAFO must meet all of the following criteria to be subject to EPA
rules:
! Animals are stabled or confined and fed for 45 days or more in a 12- month period;
! Vegetation is not sustained during the normal growing season on any portion of the
lot or facility (i.e., animals are not maintained in a pasture or on rangeland);
! Feedlots hold more than 1,000 animal units (AU) (or between 300 and 1,000 AU if
pollutants are discharged from a manmade conveyance or are discharged directly
into waters passing over, across, or through the facility). Also, animal feeding
operations that include fewer than 300 AU may be designated as CAFOs if they
pose a threat to water quality or use.
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conditions for whether a middle tier (300 to 999 AU) operation is a CAFO. Operations with
fewer than 300 AU, the third tier, would become CAFOs only if they were causing a pollution
problem. The second option is a two-tiered structure in which all operations with more than
500 animal units are defined as CAFOs. Those with fewer than 500 would be classified as
a CAFO only if designated by a permit authority after evaluation on a case-by-case basis. In
addition to stricter permitting requirements, the proposal includes several new controls on
waste discharges and land applications.15
EPA estimates the proposed regulations will result in compliance costs to CAFO
operators of $850-$940 million per year, would regulate between 26,000-39,000 AFOs (5-
10% of all AFOs), and would address 60%-70% of all AFO produced manure. Currently,
only an estimated 2,500 livestock operations have enforceable permits under the Clean Water
Act. Operations with fewer animals, e.g., 300 beef cattle, 200 dairy cattle, 750 hogs, and
30,000 chickens, could be subject to the new rules. A major concern for producers is the cost
of complying with environmental regulations. To assist producers, some funding is available
from EPA and also from USDA through the Environmental Quality Incentive Program
(EQIP). Authorization proposals in pending farm bill legislation would increase funding.
Critics of the proposed regulations claim that large operations, those with more than
1,000 AU, already are defined as CAFOs and must have EPA point source discharge permits
(although many do not, according to EPA). As a result, much of the cost of the new rule will
be borne by the 20,000 - 40,000 smaller operations that EPA predicts now will fall under the
regulation. However, if the EPA rule as proposed is finalized, all AFOs (large and small)
would be subject to new and more explicit requirements regarding land application, setbacks,
co-permitting, etc., which are not included in the current rules that EPA’s proposal would
replace. Additionally, some critics argue the regulations will hurt diversified farmers who use
chicken litter as an economic source of fertilizer on crop fields and pastures.
The environmental community believes that greater regulation is warranted. In
particular, it contends that changes in the structure of agriculture, with an increasing number
of very large farm operations and growing concentration, are increasing the scope of
environmental problems, and making livestock agriculture more like other economic sectors.
In the past, Congress has set agriculture apart from other economic sectors, and made it
largely exempt from major environmental laws.
Farm Bill.16 Current law requires that half the funding under EQIP, a cost sharing
program, go to livestock producers. The House bill would reauthorize this requirement and
would gradually increase program funding from the current authorized level of $200 million
to $1.5 billion in FY2010. The Senate bill would ramp up EQIP funding to $1.05 billion in
FY2006, but does not renew the livestock funding requirement that 50% of the total be used
to address livestock production practices. It does, however, include livestock in the
definitions —so sponsors assume that an unspecified portion of the funding will continue to
flow to livestock producers— and also adds comprehensive nutrient management to the list
of eligible practices. Also it would authorize a new Conservation Security Program, and
15 Please see CRS Report RL30437, Water Quality Initiatives and Agriculture.
16 Please see CRS Report RL31255, Resource Conservation Title: Comparison of Current Law with
Farm Bills Passed by the House and Senate.
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livestock producers would be eligible to receive payments in return for installing and
maintaining specified conservation practices. Additionally, it increases funding for numerous
conservation programs; some of these increases may benefit some livestock producers.
Animal Health Issues17
“Mad Cow” Disease18
“Mad cow” disease, or BSE, is a slowly progressive, incurable disease affecting the
central nervous system of cattle. It was first diagnosed in Britain in 1986. U.S. federal and
state agencies have found no BSE in U.S. cattle since they began surveillance in 1989.
Scientific uncertainty about BSE’s cause and transmission has led the U.S. government
to take several precautionary steps and to develop an emergency response plan to implement
if a case is found. USDA’s Animal and Plant Health Inspection Service (APHIS) has banned
the import of all live ruminants from countries where BSE is known to exist since 1989. In
1991, APHIS banned the importation of rendered by-products from ruminants. As of
December 2000, the importation of all rendered animal protein products (whether from
ruminants or not) is prohibited. The Food and Drug Administration (FDA), which regulates
animal feed ingredients domestically, banned the feeding of virtually all mammalian proteins
to ruminants in August 1997. However, an FDA survey in 2000 showed that full compliance
has been difficult to achieve. In January 2001, a group of meat industry associations,
including the NCBA, the American Feed Industry Association, and AMI, issued a joint
statement pledging a concerted effort to reach 100% compliance with the FDA ban on feeding
mammalian proteins to livestock. A June 2001 FDA survey showed that 22% of renderers,
feed mills, and other facilities that handle ruminant material still are out of compliance with
FDA’s labeling, record keeping, and commingling requirements. Nonetheless, a study
released November 30, 2001, by the Harvard Center for Risk Analysis states that the steps
that USDA and the Health and Human Services have taken to date to prevent and prepare for
possible BSE introduction are effective, although some improvements still could be made.
FSIS’s responsibility regarding BSE requires the agency’s inspectors to divert from
processing any cattle showing suspicious clinical symptoms and send their brains to an APHIS
laboratory in Ames, Iowa, for testing. More than 11,000 cattle brains have been tested since
1990, and no BSE has been found. Under FSIS’s foreign meat inspection program, no
establishments in countries where BSE has been found are approved to ship beef to the
United States.
On April 24, 2001, the President signed legislation that requires the federal agencies that
have a role in preventing the importation of “mad cow” disease and foot and mouth disease
to prepare a report for Congress and U.S. citizens on their coordinated activities, among
other things (S. 700/P.L. 107-9).
17 CRS contacts: Jean Rawson 7-7283, and Alex Segarra 7-9664.
18 Please see CRS Report RS20839, Mad Cow Disease: Agriculture Issues.
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Foot-and-Mouth Disease19
APHIS is the USDA agency primarily responsible for assuring that the foot-and-mouth
livestock disease outbreak in England and in other places such as Argentina and the Middle
East, does not migrate to the United States. As with BSE, FSIS inspectors are responsible
for monitoring slaughter animals for any signs of disease, culling suspicious animals, and
testing them to determine disease status. APHIS has banned imports of live animals and
meats from countries with active FMD outbreaks, and reportedly has strengthened inspections
of airline and ship passengers and cargo at U.S. ports of entry. However, a report released
by the USDA’s Office of Inspector General in July 2001, found flaws in APHIS’ inspection
and tracking systems that allowed prohibited meat products to enter the United States
(although they were prevented from going into commerce) (the OIG report is available at
[http://www.usda.gov/oig/auditrpt/auditrpt_APHIS.html]).
Humane Slaughter
Under provisions in the Federal Meat Inspection Act (21 U.S.C. 603(b), 610(b), 620(a)),
FSIS inspectors are responsible for enforcing the Humane Slaughter Act (7 U.S.C.
1901-1906). This act requires that all livestock (but not poultry) be rendered unconscious
before slaughter. FSIS inspectors have the authority to stop slaughter lines and order plant
employees to take corrective actions to ensure compliance with the act. Public awareness of
conditions in livestock slaughter operations has been heightened recently by large newspaper
advertisements, placed by animal rights organizations (primarily the Humane Farming
Association and affiliated groups), claiming that packing plants routinely slaughter conscious
animals. Formal investigations by state authorities of the plants where the rights groups allege
abuses to have occurred have discredited their claims. Relatedly, public awareness has risen
concerning the treatment of nonambulatory cattle at stockyards. Amendments addressing
each of these issues were added to the farm bill.
Farm Bill. The House and Senate bills contain similar provisions to (1) Provide a sense
of Congress regarding the full enforcement of the Humane Methods of Slaughter Act. (2)
Amend the Packers and Stockyards Act to make it unlawful to move any nonambulatory
animal unless it has been humanely euthanized first.
LEGISLATION
Competition, Antitrust, and Industry Structure
H.R. 231 (Kaptur). Amends the Packers and Stockyards Act to extend GIPSA’s
oversight authority to the poultry industry. Introduced January 6; referred to the Agriculture
Committee. On March 23, referred to the Livestock and Horticulture Subcommittee.
19 Please see CRS Report RS20890, Foot and Mouth Disease: A Threat to U.S. Agriculture.
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S. 20 (Daschle). Securing a Future for Independent Agriculture Act of 2001. A wide
ranging agricultural bill containing several animal-agriculture related provisions including (1)
protecting farmers from anticompetitive practices, (2) ensuring fairness in contracting, (3)
requiring large companies to file annual reports with the Secretary of Agriculture, (4)
requiring a GAO study on competition and concentration within agriculture and, (5) requiring
country-of-origin labeling. Introduced January 22; referred to the Agriculture Committee.
S. 282 (Harkin). Creates within DOJ a position to handle agricultural antitrust issues.
Introduced February 7; referred to the Judiciary Committee.
H.R. 1526 (Thune). Agriculture Competition Enhancement Act of 2001 would (1)
prevent large agricultural mergers, (2) allow the Secretary of Agriculture to review
agricultural mergers, (3) establish an agricultural antitrust position within the Department of
Justice and, (4) direct GAO to conduct a study of GIPSA’s oversight authorities. Introduced
April 4; referred to the Agriculture Committee (on April 23, referred to the Livestock and
Horticulture Subcommittee; on May 15, executive comment requested from USDA) and the
Judiciary Committee.
S. 1076 (Grassley). Agriculture Competition Enhancement Act includes provisions
dealing with agricultural mergers, and extends GIPSA oversight to poultry producers.
Introduced June 21; referred to the Judiciary Committee.
H.R. 3383 (Moran). To require the Attorney General of the United States and the
Federal Trade Commission to issue guidelines relating to mergers by wholesale purchasers
of livestock, poultry, and unprocessed agricultural commodities. Introduced November 29;
referred to the Judiciary Committee.
H.R. 3810 (Nussle). Livestock Ownership Fairness Act of 2002, would (1) prohibit
livestock packers from owning or feeding livestock intended for slaughter for more than 14
days before slaughter, (2) require certain agricultural mergers to notify the Secretary of
Agriculture, and (3) require the Attorney General to establish an Office of Special Counsel
for Agriculture. Introduced February 27, 2002; referred to the Agriculture Committee and
the Judiciary Committee.
Environment
H.R. 1138 (Nick Smith). Amends the Federal Water Pollution Control Act to provide
that no permit shall be required for animal feeding operations within the boundaries of a state
if the state has established and is implementing a nutrient management program for those
animal feeding operations. Introduced March 21; referred to the Transportation Committee.
On March 22, referred to the Water Resources and Environment Subcommittee.
Animal Health
H.R. 3804 (Sherrod Brown). The Preservation of Antibiotics for Human Treatment
Act of 2002, would amend the Federal Food, Drug, and Cosmetic Act to ensure that use of
certain antibiotic drugs in animal agriculture does not compromise human health by
contributing to the development of antibiotic resistance. Introduced February 27, 2002;
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referred to the Energy and Commerce Committee. Referred to the Health Subcommittee on
February 13.
FOR ADDITIONAL READING
CRS Report RS20562, Merger and Antitrust Issues in Agriculture.
CRS Electronic Briefing Book Structural Change, Concentration, and Market Power
([http://www.congress.gov/brbk/html/ebagr6.html]).
“Pork Promotion Program. Petition Validation Process Needs to Be Strengthened.”
September 2000. GAO, Report RCED-00-274.
CRS Report 98-253, U.S. Agricultural Trade: Trends, Composition, Direction, and Policy.
CRS Report 97-616, Environmental Quality Incentives Program (EQIP): Status and Issues.
CRS Report 98-451, Animal Waste Management and the Environment: Background for
Current Issues.
CRS Electronic Briefing Book Conservation and Environment
([http://www.congress.gov/brbk/html/ebagr7.html]).
CRS Issue Brief IB10082, Meat and Poultry Inspection Issues.
CRS Electronic Briefing Book “The Farm Bill”: Introduction and Status
([http://www.congress.gov/brbk/html/ebagr11.html]).
CRS Report RL31272, A New Farm Bill: Comparing the House and Senate Proposals with
Current Law.
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