Order Code IB10063
Issue Brief for Congress
Received through the CRS Web
Animal Agriculture: Issues in the 107th Congress
Updated September 17, 2002
Jerry Heykoop
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Industry Issues
Emergency Assistance
In Congress
Farm Bill
Check-Offs
Beef
Pork
Farm Bill
Sheep Industry
Competition and Industry Structure
Concentration and Structure
Government Response
In Congress
Farm Bill
Banning Packer Ownership of Livestock
Mandatory Price Reporting
Trade
Russia (Poultry)
Europe (Beef)
Country-of-Origin Labeling
Farm Bill
Environment
Farm Bill
Animal Health
“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,
challenges, with the beef checkoff program
including prices, the impact of consolidation
currently in a court case. The pork checkoff
in the meat production/packing industry, trade,
program was reinstated on February 28, 2001,
and the environmental impacts of large feed-
in an agreement reached between USDA and
lots, continue to generate interest in Congress.
the National Pork Producer’s Council. Former
Secretary Glickman had ordered the checkoff
The farm bill (P.L. 107-171; H.R. 2646),
canceled after it was voted down in a disputed
signed by the President on May 13, 2002,
producer referendum.
contains several provisions that would affect
animal agriculture, including protections for
Outbreaks of foot-and-mouth disease and
contract growers, disaster assistance, country-
persistent findings of mad cow disease in
of-origin labeling, and increased funding for
Europe have deepened concerns about the
conservation purposes.
United States’ ability to prevent these dis-
eases or eradicate them should an outbreak
Concerns about the impact of consolida-
occur.
tion in the livestock industry and the agricul-
tural sector overall, have spurred legislative
On August 23, 2002, USDA announced
interest in remedies. In the farm bill, a con-
Russia lifted a ban on U.S. poultry imports
tentious provision banning packer ownership
that had been in place since March 10, 2002.
of livestock was dropped in conference, but
The ban stemmed from Russian concerns over
the issue may come up again in further hear-
antibiotics in feed and the use of chlorinated
ings. (Please see CRS Report RL31553,
water during processing.
Livestock: A Ban on Ownership and Control
by Packers.)
Disputes continue with the European
Union over its barriers to U.S. meat and poul-
The FY2001 USDA appropriations law
try imports despite a WTO ruling that these
(P.L. 106-387) contained a mandatory price
barriers violate the WTO agreement.
reporting provision that requires large meat
packers to report prices they pay for cattle and
In December 2000, the Environmental
hogs, among other provisions. The provision
Protection Agency proposed new permitting
was implemented on April 2, 2001, but prob-
controls that would apply to concentrated
lems arose with reporting of prices. USDA
animal feeding operations. The proposal
has implemented changes to fix those prob-
includes the objective of preventing
lems and increased the frequency of reporting.
discharges from manure-storage lagoons, and
limiting the spreading of manure to protect
Checkoff programs, which fund market-
waterways. Final regulations are due by
enhancing activities, continue to face legal
December 15, 2002.
Congressional Research Service ˜ The Library of Congress
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MOST RECENT DEVELOPMENTS
On September 10, 2002, the full Senate agreed to a Daschle amendment (S. Amdt. 4481)
to the FY2003 Interior Appropriations bill (H.R. 5093), which would provide an estimated
$1.45 billion for livestock disaster assistance.
On August 23, 2002, USDA announced a final resolution to the poultry trade dispute
with Russia. The ban on imports of U.S. poultry had been in place since March 10, and
stemmed from Russian concerns of antibiotics in poultry feed and the use of chlorinated
water during processing.
The new farm bill (P.L. 101-171), “The Farm Security and Rural Investment Act of
2002," was signed by the President on May 13, 2002. It contains several key provisions that
would affect animal agriculture, including protections for contract growers, funding for
livestock producers during natural disasters, country-of-origin labeling, and increased
funding for conservation purposes.
BACKGROUND AND ANALYSIS
In 2001, U.S. farmers received $106.4 billion from the sale of animal products, about
52% of all farm cash receipts. For 2002, forecasts are lower ($97 billion and almost 50%)
according to the U.S. Department of Agriculture’s (USDA) Economic Research Service
(ERS).
Drought conditions are forcing more cattle into feedlots and possibly delaying herd
expansion for at least another year. Wide-spread drought conditions are pushing up feed
costs as crop and pasture conditions
erode. The higher feed costs are reducing
M e at and P oultr y P r oduc tion and Pr ice s
B ee f
2 00 3
20 02
2 001
producers’ returns, which means more
P rod uc tion (b illio n po und s)
25 .2
26 .8
26 .1
meat production in the short term as more
Fe d ste e rs ($ /h und red pou nds)
$7 2-7 8
$6 7-6 8
$ 73
females are slaughtered and lower long-
Fe e de r ste e rs ($ /hu nd re d p oun ds)
$8 3-8 9
$7 7-7 8
$ 88
term production as the number of
Pe r c ap ita co nsu mp tion (po und s)
63 .2
67 .3
66 .2
P or k
breeding animals is reduced, according to
P rod uc tion (b illio n po und s)
19 .9
19 .8
19 .1
ERS. Poultry exports are down due
M arke t pric e ( $/hun dre d po und s)
$3 4-3 6
$3 4-3 5
$ 46
largely to uncertainty in the Russian
Pe r c ap ita co nsu mp tion (po und s)
51 .3
51 .8
50 .2
market, increased beef production due to
S hee p
drought-reduced forage supplies, and a
P rod uc tion (m illio n p oun ds)
2 10
2 19
2 23
Fa rm p ric e ( $/hun dre d po und s)
$6 4-6 6
$6 4-6 6
$ 72
lackluster domestic economy with slower
Pe r c ap ita co nsu mp tion (po und s)
1. 1
1. 2
1. 1
than previously expected growth,
B roile r s
livestock and meat prices are expected to
P rod uc tion (b illio n po und s)
33 .0
32 .2
31 .3
continue to face downward pressure.
M arke t pric e ( ¢/po und )
57 -61 ¢
56 -57 ¢
59. 1¢
ERS analysts expect hog prices to average
Pe r c ap ita co nsu mp tion (po und s)
80 .2
80 .5
76 .5
T ur key
in the mid-$30s. In some reports, hog
P rod uc tion (b illio n po und s)
5. 7
5. 7
5. 6
prices are projected downward with
M arke t pric e ( ¢/po und )
64 -69 ¢
65 -67 ¢
66. 3¢
prices approaching those experienced in
Pe r c ap ita co nsu mp tion (po und s)
17 .5
17 .3
17 .5
1998 and 1999.
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Industry Issues
Emergency Assistance1
Much of the Western, Great Plains, and Eastern states have been affected by persistent
drought this year, which has had an impact on the regions’ crop and livestock production.
USDA offers several ongoing programs to help farmers recover financially from a natural
disaster, including emergency disaster loans.
In past years, Congress approved various forms of additional ad-hoc emergency disaster
assistance - primarily crop disaster payments and emergency livestock assistance. Since
these ad-hoc programs last applied to only 2000 production losses, Congress currently is
considering making assistance available for 2001 and 2002 losses. If such assistance is
provided using the same payment formula that was used for 2000 losses, government costs
could exceed $5 billion.
At issue is whether proposed ad-hoc disaster assistance should be provided without
equivalent reductions in spending on other programs. Proponents of additional assistance
claim that the currently available programs do not adequately address farmers’ needs. The
President has stated that the new farm spending authorized by the recently enacted omnibus
2002 farm bill (P.L. 107-171) —estimated at $52 billion over six years by the Congressional
Budget Office (CBO)— provides adequate farm commodity support, and that any additional
assistance should be offset with reductions in other spending.
In Congress. On September 10, 2002, the full Senate agreed to a Daschle amendment
(S. Amdt. 4481) to the FY2003 Interior appropriations bill (H.R. 5093), which would provide
an estimated $5.95 billion in crop and livestock disaster assistance to farmers for both 2001
and 2002 production year losses. (The text of the Daschle Amendment is identical to S. 2800
(Baucus), which was introduced on July 25, 2002.) The House-passed version of H.R. 5093
contains no comparable disaster provisions.
The adopted Daschle amendment would provide “such sums as are necessary” to fully
fund crop and livestock disaster payment formulas that were last used for 2000 production
losses. For livestock growers, direct payments will be made to any producer in a disaster-
declared region who suffered a minimum 40% loss of available grazing for at least 3
consecutive months. The CBO score of $5.95 billion ($4.5 billion for crop assistance and
$1.45 billion for livestock assistance) for the amendment was recently revised upward to this
level to reflect deteriorating crop conditions in the late summer months.
Meanwhile, USDA has exercised its standing authority to release a portion of its
inventory of nonfat dry milk purchased under the dairy price support program, which will be
converted into $150 million of livestock feed and provided to certain drought-stricken states.
USDA also will allow ranchers to cut hay and graze livestock until November 30, 2002, on
acreage that has been set aside for certain conservation use.
1 CRS contact: Ralph Chite 7-7296.
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Additionally, on September 9, 2002, USDA announced it will purchase up to $30
million of pork products for use in school feeding and nutrition programs to provide a boost
to pork producers who have experienced tough economic conditions this year. USDA
already has purchased 13.8 million pounds of pork products this school year, and additional
purchases could bring the total up to 66 million pounds. This compares to 29.9 million
pounds for the 2001-2002 school year and 22.8 million pounds in 2000-2001.
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.
Loan applications must be filed by September 30, 2002.
Farm Bill. The new farm law would permanently authorize livestock assistance,
subject to annual appropriations, and at the discretion of the Secretary of Agriculture (Sec.
10104).
Check-Offs2
Supporters of check-off programs, which fund advertising, research, and other market-
enhancing activities, view them as self-help; government involvement and cost are minimal.
Producers and, often, importers are required to fund them through assessments, usually
deducted from revenue at time of sale (thus the name check-off). USDA’s role largely is
limited to administrative and oversight duties. However, USDA generally has supported
check-off programs.
The mandatory aspects of check-offs have generated strong opposition among some
farmers, who contend they must pay “taxes” for activities they would not underwrite
voluntarily. Groups representing these producers have challenged the programs in USDA
and the courts. Two cases have reached the U.S. Supreme Court, which was asked to decide
on whether the programs violate the free speech provisions of the First Amendment.
Beef. In 2001, the Supreme Court found in United States v. United Foods, Inc. (533
U.S. 405,412 (2001)) that the mushroom check-off infringed upon free speech. The Court’s
decision impacts other legal challenges of some of the 15 operational, federally-authorized
check-off programs. On June 21, 2002, a U.S. District Court in South Dakota agreed that
the national beef check-off also violates the First Amendment. The court ordered all beef
assessments to halt by July 15, 2002, but the ordered was stayed while the U.S. Government
appeals the ruling.
Pork. In August-September 2000, USDA conducted a non-binding referendum on
whether to continue the pork check-off at the behest of several producer groups led by the
Campaign for Family Farms. The groups prevailed to end the program, but the National
Pork Producers Council (NPPC) subsequently won a temporary restraining order to prevent
USDA from publishing a final termination rule. A February 2001, settlement agreement was
reached, whereby the checkoff would continue with modifications, including assurances that
the check-off board would operate independently of NPPC and be more responsive to
producers’ concerns about its activities. In addition, USDA will conduct a survey in June
2 Please see CRS Report 95-353 Federal Farm Promotion (“Check-off”) Programs.
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2003, and if 15% of producers and importers favor a binding referendum, it will be held
within one year.3
Farm Bill. Section 10607 of the new farm law exempts from any commodity check-
offs persons who produce and market 100% organic products.
Sheep Industry
Acting on a Section 201 petition4 filed by the American Sheep Industry Association and
others, the International Trade Commission 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 World Trade Organization (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 initiative) through FY2003 to help the U.S. industry continue to adjust
to import competition.5
Competition and Industry Structure
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 on changes in the 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
3 Additional information about the settlement and related issues is available at:
[http://www.ams.usda.gov/lsg/mpb/pork.htm].
4 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.
5 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].
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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 ownership, 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 the
Environmental Protection Agency (EPA). Others have discussed quality-of-life issues
related to both the loss of small operations (including the loss of traditional lifestyles) and
the growth of large operations (including air quality issues).
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 2000, compared
with 40% in 1990. In 1997, 64% of all hogs were marketed through some form of forward
sales arrangement between producers and packers, although 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 one-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.
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The poultry industry has been almost entirely vertically integrated for decades, and has
had significant vertical integration almost from the beginning as a commercial industry. The
pork industry is increasing its vertical integration and becoming more similar to the poultry
industry in structure. In the cattle sector, the four largest beef packers accounted for 69% of
all cattle slaughtered in 2000, 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. No consensus on what actions to take were reached in any of these
hearings.
A September 2000, 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.6 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, the Department of Justice (DOJ), and the Federal Trade
Commission (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 2002 farm law contains new provisions that would: (1) Extend GIPSA
authority to include swine production contracts (Sec. 10502). (Previously, GIPSA protected
broiler farmers who grow under contract and livestock producers who sell directly to packers,
6 U.S. Government Accounting Office. RCED-00-242: Packers and Stockyards Programs: Actions
Needed to Improve Investigations of Competitive Practices. September 2000.
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but GIPSA did not have authority over livestock producers who grow under contract.); and
(2) Allow contract producers to discuss the contract with family, advisors, and enforcement
agencies even if the contract contains a confidentiality clause (Sec. 10503).
Banning Packer Ownership of Livestock7
Producers who face fewer marketing options and less competition for their livestock
have expressed concern about captive supplies.8 They believe packers are using captive
supplies to manipulate market prices that are more favorable to packers, and less favorable
to producers. That is, as packers buy fewer animals on the spot market, reported prices no
longer accurately reflect prices paid for a majority of livestock. Many producers feel this
reduction in price transparency works to their increasing disadvantage relative to packers.
Contract prices typically are tied to spot prices. Thus, a packer has financial incentive to buy
or not buy on the spot market not only to reduce spot prices, but also because livestock
bought on contract are priced through the spot market. Some producers have suggested that
one remedy to captive supplies and the perceived market manipulation is to ban packer
ownership and control of livestock.
In response to calls from some producers, the Senate-passed farm bill (S. 1731; H.R.
2646 as amended) contained a provision (Johnson amendment) that would have prohibited
packers from owning, feeding, or controlling livestock for more than 14 days prior to
slaughter. Livestock producer-owned cooperatives and entities owned by such cooperatives,
and producer-owned packers that slaughter less than 2% of U.S. totals were exempted from
the ban. The provision was not included in the House-passed farm bill (H.R. 2646), and was
not included in the final legislation (P.L. 107-171).
Supporters of a ban believe it will limit packers’ ability to manipulate the market, and
would improve farmers’ prices and access to livestock markets. They are concerned about
the pace of vertical integration in the livestock industry and believe a ban is a way to stop or
slow down vertical integration. Opponents of a ban argue it would reverse many of the
production efficiency gains made by the livestock industry in recent years through closer
packer-producer alliances. At the least, they contend, it would create turmoil in the industry
because packers and producers would have to undo many relationships built over time.
The proposed packer ban continues to generate legislative interest (H.R. 5247, S. 2021,
S. 2867), with potential amendments to the Agricultural Appropriations bills (H.R. 5263 and
S. 2801) discussed. The Senate Agriculture Committee held a hearing on this issue on July
16, 2002, and the Senate Judiciary Committee held a field hearing on August 23, in South
Dakota.
7 Please see CRS Report RL31553, Livestock: A Ban on Ownership and Control by Packers.
8 There is no official definition for captive supplies, but the term generally refers to animals that are
committed to, or are owned by, a packer more than 14 days prior to slaughter.
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Mandatory Price Reporting9
Mandatory price reporting (MPR) for large packers was incorporated by conferees into
the FY2000 USDA appropriations law (P.L. 106-78) 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, and requires the reporting of market information by meatpackers who slaughter
an average of at least 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. Market news reports that are 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 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.10
USDA announced on July 2, 2001, that it had begun to implement the changes
recommended by the Review Team. Additionally, on August 3, 2001, 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.
9 For additional information, please see CRS Report RS20079, Livestock Mandatory Price
Reporting, and AMS’ MPR site at: [http://www.ams.usda.gov/lsg/mncs/LS_MPR.htm].
10 The Review Team’s Report can be viewed at: [http://www.usda.gov/oce/mp-report/index.htm].
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Trade11
The United States is the world’s
U.S. as Percent of World Market
Year 2001
leading beef consumer, producer, and
50%
importer and the second leading
exporter. The United States is the third
40%
leading pork consumer, producer,
importer, and exporter. The United
30%
States is the leading consumer and
20%
producer of poultry meat and
dominates the export market with 46%
10%
of total world exports, while
accounting for less than 1% of total
0%
Production
Consumption
Exports Imports
imports.
Beef
Pork
Poultry
Russia (Poultry)12
Earlier this year, Russia announced it was banning imports of U.S. poultry, effective
March 10, 2002. Among Russia’s concerns were findings of salmonella on meat, the use of
chlorinated water in the processing of U.S. birds, and the feeding of antibiotics. Speculation
had existed that the Russian poultry ban came in response to the new U.S. tariffs on imported
steel. USDA, U.S. Trade Representative, and Federal Drug Administration officials met with
Russian officials and reached a settlement on March 31, agreeing to lift the poultry ban on
April 10. That deadline was missed and the ban formally was lifted April 15. Due to the
new protocol established by the agreement, Russian importers had to apply for new permits,
which effectively raised a de facto ban. On August 23, USDA announced the trade dispute
was resolved and an agreement was reached on new veterinary certificates that would allow
imports of U.S. poultry.
Europe (Beef)13
In a continuing dispute, 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.
11 CRS contacts: Charles Hanrahan 7-7235, and Geoff Becker 7-7287.
12 For more detailed information, please see the USDA websites at:
[http://www.fsis.usda.gov/OFO/export/Russia.htm]
[http://www.ams.usda.gov/poultry/grading/ECP-RussianFederation.pdf].
13 Please see CRS Report RS20142, The European Union’s Ban on Hormone-Treated Meat, and the
E l e c t r o n i c B r i e f i n g B o o k U . S . - E U M e a t H o r m o n e D i s p u t e , a t :
[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].
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Country-of-Origin Labeling14
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. They argue consumers would pay more for domestic produce than for imports. 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 consider that information when 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—
undermine ongoing efforts to reduce other countries’ trade barriers and expand international
markets for U.S. products.
Farm Bill. The new farm law requires retailers to provide —on a voluntary basis—
country of origin information to consumers of perishable fruits and vegetables, peanuts, fresh
beef, lamb, and pork, and farm-raised and wild fish/shellfish. After two years, the program
will become mandatory (Sec. 10816).
Environment15
Dramatic changes in the livestock industry in the past 20 years, including the continued
trend toward fewer but larger operations, coupled with greater emphasis on more intensive
production methods and specialization, have concentrated more manure and other animal
waste constituents within some production areas where more and more of the larger livestock
facilities are concentrated. The available land in some of these areas cannot properly
assimilate all the manure, and excessive amounts of waste are either spread on fields or
stored, in some cases causing chemical and nitrogen runoff into waterways, and resulting in
fish kills and other problems.
Animal feeding operations (AFOs) are facilities where animals are kept and raised in
confined situations —feed is brought to the animals. When large enough, these facilities are
designated as concentrated animal feeding operations (CAFOs) and they become subject to
regulatory requirements promulgated by EPA to prevent water pollution. At present, a
CAFO generally is defined as having 1,000 animal units (AU), a threshold that 11,200
operations exceed according to the most recent Census of Agriculture, collected in 1997.16
14 Please see CRS Report 97-508, Country-of-Origin Labeling for Foods: Current Law and
Proposed Changes.
15 CRS contacts: Jeff Zinn 7-7257, and Claudia Copeland 7-7227.
16 Under the existing permit rules, a CAFO must meet all of the following criteria to be subject to
EPA rules:
(continued...)
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Under federal clean water law, 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 under rules issued in the mid-1970s. On December 15, 2000,
EPA proposed revised rules that focus primarily on manure runoff, containment, and
disposal.17 EPA has held eight public meetings across the country to provide additional
information and gather public comment on the proposal. EPA is under a court order to take
final action on these regulations by December 15, 2002. Under the current EPA proposal,
for newly defined CAFOs, permits would not be required until three years after final
regulations are published, but the new requirements would take immediate effect for existing
CAFOs.
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; more
than 1,000 AU, 300 to 999 AU, and fewer than 300 AU. Operations in the middle tier could
be considered CAFOs, while operations in 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 AU are defined as CAFOs. Those with fewer than 500 AU
would be classified as a CAFO only if designated by a permit authority after an evaluation.
In addition to stricter permitting requirements, the proposal includes several new controls on
waste discharges and land applications of waste.18 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 (of
the estimated 11,200 CAFOs) have enforceable permits under the Clean Water Act. To
assist producers who will have to comply, some funding is available from EPA and also from
USDA through the Environmental Quality Incentive Program (EQIP). The 2002 farm bill
reauthorizes EQIP through FY2007 and gradually increases funding to $1.3 billion in the
final year. It provides 60% of the funding each year to issues related to livestock
production.19 It limits total payments to any individual or entity over the authorization period
to a total of $450,000; provides incentive payments to producers who develop
Comprehensive Nutrient Management Plans; and requires that all livestock producers who
receive funding for animal waste manure systems have those plans.
16 (...continued)
–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.
17 For more information on EPA’s proposal, please visit its web site at:
[http://www.epa.gov/npdes/afo/].
18 Please see CRS Report RL30437, Water Quality Initiatives and Agriculture.
19 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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Critics of the proposed EPA 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 most do not, as noted above). 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.
The environmental community believes that greater regulation is warranted. In the past,
Congress has set agriculture apart from other economic sectors, and made it largely exempt
from major environmental laws. Environmentalists now contend 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, thus eliminating any justification for an
exemption.
Farm Bill. In addition to the EQIP program, other conservation initiatives also may
benefit livestock producers. The new Conservation Security Program, enacted in the 2002
farm bill, will provide payments to all producers who install and maintain specified
conservation practices. Three levels of conservation and payments are specified. More
comprehensive conservation efforts would be eligible for higher levels of payments. Other
new programs that may offer new opportunities to some livestock producers include a
grassland retirement program, several water conservation initiatives, and smaller programs
limited to certain regions or states.
Animal Health20
“Mad Cow” Disease21
“Mad cow” disease, or bovine spongiform encephalopathy (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.22
As of December 2000, the importation of all rendered animal protein products (whether from
20 CRS contacts: Jean Rawson 7-7283, and Alex Segarra 7-9664.
21 Please see CRS Report RS20839, Mad Cow Disease: Agriculture Issues.
22 A ruminant is an animal with a stomach that has four compartments, and a more complex digestive
system than other mammals. Ruminants include cattle, sheep, goats, deer, bison, elk, and camels.
Swine, dogs, and humans are examples of nonruminants.
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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 National Cattlemen’s Beef Association, the American Feed Industry
Association, and the American Meat Institute, 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
Department of 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.
USDA’s Food Safety and Inspection Service’s (FSIS) 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.
Foot-and-Mouth Disease23
APHIS is the USDA agency primarily responsible for ensuring that the foot-and-mouth
disease (FMD) 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
23 Please see CRS Report RS20890, Foot and Mouth Disease: A Threat to U.S. Agriculture.
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groups allege abuses to have occurred have not substantiated their claims. Relatedly, public
awareness has risen concerning the treatment of nonambulatory cattle at stockyards.
Farm Bill. The new farm law provides a sense of Congress regarding the full
enforcement of the Humane Methods of Slaughter Act (Sec. 10305), and calls for an
investigation of the treatment of nonambulatory animals and giving the Secretary authority
to promulgate regulations if the findings warrant (Sec. 10815).
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, 2001, and referred to the Agriculture Committee.
On March 23, 2001, referred to the Livestock and Horticulture Subcommittee.
S. 282 (Harkin)
Creates within DOJ a position to handle agricultural antitrust issues. Introduced
February 7, 2001, and 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, 2001, and referred to
the Agriculture Committee (on April 23, 2001, referred to the Livestock and Horticulture
Subcommittee; on May 15, 2001, 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, 2001, and
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, 2001, and 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
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February 27, 2002, and referred to the Agriculture Committee (March 6, referred to
Livestock Subcommittee) 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, 2001, and referred to the Transportation Committee. On
March 22, 2001, referred to the Water Resources and Environment Subcommittee.
Animal Health
H.R. 2622 (Reynolds)
The Helping Out to Rescue and Save Equines Act, would prohibit the interstate
transport of (1) horses (other than downed animals) for the purpose of slaughter, and (2)
horse flesh for human consumption. Sets forth related inspection, confiscation, and penalty
provisions, including rescue facility grants. Introduced July 25, 2001, and referred to the
Agriculture Committee. On August 1, 2001, referred to Livestock Subcommittee.
S. 1482 (Harkin)
The Animal Health Protection Act, would authorize the Secretary of Agriculture to
restrict the importation, entry, or further movement in the United States, or order the
destruction or removal, of animals (including livestock) and related conveyances and
facilities for reasons of livestock pest or disease control, or humane treatment. Introduced
October 2, 2001, and referred to the Agriculture Committee.
S. 1595 (Feingold)
The Johne’s Disease Elimination Act, would authorize the Secretary of Agriculture to
establish a program to control bovine Johne’s disease. Introduced October 31, 2001, and
referred to the Agriculture Committee.
H.R. 3781 (Morella)
The American Horse Slaughter Prevention Act, would prohibit the slaughter of horses
for human consumption and prohibit the trade and transport of horseflesh and live horses
intended for human consumption. Introduced February 14, 2002, and referred to the
Agriculture Committee (February 25, referred to Livestock Subcommittee), International
Relations Committee, and Ways and Means Committee.
H.R. 3804 (Sherrod Brown) and S. 2508 (Kennedy)
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. H.R. 3804 introduced February 27, 2002, and referred to the Energy
and Commerce Committee; referred to the Health Subcommittee on March 13, 2002. S.
2508 introduced May 13, 2002, and referred to the Health, Education, Labor, and Pensions
Committee.
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S. 2532 (Schumer)
The Meat and Poultry Products Safety Improvement Act of 2002, would require
microbiological performance standards for federally inspected meat and poultry plants, and
an animal identification system that would facilitate the trace-back of meat and poultry to the
live animal. Introduced May 17, 2002, and referred to the Agriculture Committee.
FOR ADDITIONAL READING
C R S E l e c t r o n i c B r i e f i n g B o o k , F a r m D i s a s t e r A s s i s t a n c e
([http://www.congress.gov/brbk/html/ebagr48.html]).
CRS Electronic Briefing Book, Structural Change, Concentration, and Market Power
([http://www.congress.gov/brbk/html/ebagr6.html]).
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 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 RL31195, The 2002 Farm Bill: Overview and Status.
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