Order Code RL33958
Animal Agriculture: 2007 Farm Bill Issues
April 11, 2007
Geoffrey S. Becker
Specialist in Agricultural Policy
Resources, Science, and Industry Division

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Animal Agriculture: 2007 Farm Bill Issues
Summary
With a few exceptions (such as milk), the products of animal agriculture are not
eligible for the price and income supports that Congress historically has written into
farm bills for major row crops such as grains, cotton, and oilseeds. However, the
meat and poultry industries do look to the federal government for leadership and
support in promoting their exports, resolving trade disputes, and reassuring markets
that their products are safe, of high quality, and disease-free. Farm bills can contain
policy guidance and resources to help achieve these objectives.
Also, animal producers closely follow the development of a new farm bill
because of its potential impact on their production marketing costs. For example,
policies promoting crop-based alternative fuels like ethanol already have raised the
prices of corn and soybeans, both important animal feedstuffs. Where additional
biofuels policy incentives are being considered for inclusion in a 2007 farm bill,
cattle, hog, and poultry producers have been urging restraint and/or encouraging more
use of non-feed crops like grasses and field wastes. Other potential farm bill issues
of interest include proposals from animal welfare groups to regulate on-farm care of
animals; and from some farmer-rancher coalitions to address perceived anti-
competitive market behavior by large meat and poultry processing companies.
The market value of animal production on U.S. dairy, livestock, and poultry
farms was more than $105 billion in 2002, more than half the total value of all U.S.
agricultural production (2002 Census of Agriculture). Producers continue to face
intense pressures to become larger, more specialized, and more cost-efficient in an
increasingly global marketplace.
In the 110th Congress, the chairman of the Senate Agriculture Committee has
introduced wide-ranging legislation (S. 622) to be the basis for a new “competition”
title in the next farm bill; it would strengthen producer rights when contracting with
meat and poultry processors; expand the U.S. Department of Agriculture’s (USDA’s)
responsibilities to enforce competitive behavior; and extend to many crop markets
some of the antitrust rules that now apply to meat packers. S. 305, S. 221, and S. 786
also propose new regulations for various farm animal buyers and/or processors.
Other bills would require USDA to implement mandatory country-of-origin
labeling on meats by September 30, 2007, instead of the currently set deadline of
September 30, 2008 (H.R. 357; S. 404); prohibit USDA from carrying out a
mandatory animal identification program (H.R. 1018); ban the slaughter of horses for
food (H.R. 503, S. 311); require that nonambulatory livestock be euthanized and not
used for food (H.R. 661, S. 394); and impose animal care standards on suppliers of
food to the federal government (H.R. 1726). Some of these also might be offered for
consideration in a new farm bill.

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Contents
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Importance of Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Prospective Issues and Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Feed Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Congressional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Market Competition and Packer Concentration . . . . . . . . . . . . . . . . . . . . . . . 6
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Congressional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Livestock Mandatory Price Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Congressional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Country-of-Origin Labeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Congressional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Animal Identification for Health Protection . . . . . . . . . . . . . . . . . . . . . . . . 15
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Congressional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Animal Welfare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Congressional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Environmental Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Congressional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Tables
Table 1. U.S. Animal Production, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Table 2. U.S. Role in Selected Meat and Poultry Trade . . . . . . . . . . . . . . . . . . . . 4
Table 3. Selected U.S. Livestock Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Table 4. Red Meat Packer Concentration, 1985 and 2005 . . . . . . . . . . . . . . . . . . 8

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Animal Agriculture: 2007 Farm Bill Issues
Overview
Most of the products of animal agriculture are not eligible for the price and
income support programs that Congress has written into farm bills for major crops
such as grains, cotton, and oilseeds.1 Nor have meat and poultry producers generally
sought such assistance, except ad hoc aid to recover losses caused by natural
disasters such as droughts and hurricanes.2 They also do not qualify for federal crop
insurance, which covers a portion of the value of production lost to natural disasters.
Some cattle and hog producers in a limited number of states do participate in
livestock revenue insurance programs being administered by USDA’s Risk
Management Agency (RMA), which provides protection from revenue losses
whether due to natural causes or economic conditions.
Animal agriculture looks to the federal government to resolve trade disputes,
establish transparent, science-based rules for importing and exporting animal
products, and reassure domestic and foreign buyers alike that these products are safe,
of high quality, and disease-free. Omnibus farm legislation can contain policy
guidance and resources related to these objectives.
Much is at stake economically: the farm value of animal production was more
than $105 billion in 2002, more than half the total value of all U.S. agricultural
production (2002 Census of Agriculture). Approximately 1.1 million of the nation’s
more than 2.1 million farms were classified by the 2002 Census as primarily animal
production operations (see Table 1).
Producers face much pressure to become larger, more specialized, and more
cost-efficient, in order to compete in the increasingly global marketplace.
Transactions today are moving away from live cash markets and toward contractual
relationships that can provide a guaranteed supply of live animals at predetermined
prices and consistent qualities. More of these animals are being supplied to feeding
operations and meat slaughtering/processing plants by Canada (beef cattle, sows and
pigs) and Mexico (beef calves), as the beef, pork, and poultry industries of the three
1 Milk, honey, and wool are notable exceptions. See CRS Report RL33037, Previewing a
2007 Farm Bill, by Jasper Womach et al.
2 For example, the agricultural disaster provisions in the pending FY2007 Iraq war
supplemental bills (H.R. 1591 and S. 965) include sums necessary to fund a Livestock
Compensation Program that would reimburse livestock growers for feed losses caused by
certain natural disasters, and to fund a Livestock Indemnity Program that would partially
reimburse producers for replacing livestock killed by a natural disaster. See CRS Report
RS21212, Agricultural Disaster Assistance, by Ralph M. Chite.

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CRS-2
North American countries have become more economically integrated over the past
two decades.3
These trends are occurring at a time when feed costs have begun to rise
significantly due largely to the government’s promotion of ethanol (now largely corn-
based) as an alternative fuel. Other longstanding public policy concerns include
animal agriculture’s obligations with respect to environmental protection, food
safety, and animal welfare.
Table 1. U.S. Animal Production, 2002
U.S. Farms by Primary Classification
Value of U.S. Sales
Numbera
$1,000b
Total farms
2,128,982
200,646,355
Total crop farms
986,625
95,151,954
Total animal farms
1,142,357
105,494,401
Beef cattle ranches
664,431
and farms
Cattle feedlots
55,472
Cattle and calves
45,115,184c
Dairy farms
72,537
Milk and products
20,281,166
Hogs and pigs
33,655
12,400,977
Poultry meat and eggs
44,219
23,972,333
Sheep and goats
43,891
541,745
Horses and other
174,441
1,328,733
equines
Other animal
53,711
1,854,262
production
Source: U.S. Census of Agriculture, 2002.
a. Based on North American Industry Classification System (NAICS).
b. Market value of agricultural products sold (and government payments) from all farms regardless
of primary (i.e., NAICS) classification.
c. Represents sales of beef cattle (including from feedlots, farms, and ranches) and of dairy cattle.
3 See William F. Hahn et al., Market Integration of the North American Animal Products
Complex (LDP-M-131-01), USDA, Economic Research Service, May 2005.

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Importance of Trade
The United States is a world leader in the production, consumption, and export
of meat and poultry products. One indicator of the increasing reliance of the animal
sector on international trade is the share of U.S. domestic production that is exported,
a figure that has increased significantly over the past 35 years.
Broiler meat exports have grown from 1.3% of production in 1970 to 14.9% of
production in 2006. Pork exports climbed from 1.3% to 14.2% over the same period
(see Figure 1). Beef exports also climbed, from 0.2% of domestic production in
1970 to 9.6% in 2003. When most countries were closed to U.S. beef after a
Canadian-born cow with bovine spongiform encephalopathy (BSE) was discovered
in Washington state late in 2003, exports dropped precipitously to 1.9% of
production in 2004. Two more BSE cases have been found in U.S.-born cattle
subsequently by a more intensive surveillance program, but beef exports are again
rebuilding gradually.
Figure 1. Selected Meat and Poultry Exports
20
Percent of U.S. Production
15
10
5
0
1970
1975
1980
1985
1990
1995
2000
2006
Beef
Pork
Broiler meat
Source: Various USDA data series.
The United States has long been a dominant world player, but increasing
reliance on exports also has brought new challenges. Other countries are competing
vigorously for the same country markets. Table 2 on the following page discusses
the relative position of the United States in world trade of beef and veal, pork,
broilers, and turkey.
Many years of effort to build export sales can be reversed abruptly due to an
animal disease outbreak. When other countries restrict U.S. meat or poultry

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products, whether due to the discovery of BSE, an outbreak of avian influenza, or
other problems, it often takes many additional years for the United States to regain
those markets, as has occurred in Japan and Korea, the first and third most important
destinations, respectively, for U.S. beef prior to the occurrence of BSE here.
Sometimes a country may impose sanitary or phytosanitary (SPS) standards that
affect U.S. imports and that the United States contends are not based on scientific
principles or otherwise violate international trade rules. Examples include Japan’s
and Korea’s years of delays in reopening their borders to U.S. beef even though the
United States follows what it argues are internationally recognized safeguards.
Another example has been the European Union’s (EU’s) refusal to accept U.S. beef
treated with approved growth hormones, despite an international panel siding with
the United States when it determined that the EU position was scientifically
indefensible. Most animal agriculture organizations expect U.S. agricultural and
trade agency officials to lead efforts in resolving such problems and in trying to
ensure that they do not arise unexpectedly.4
Table 2. U.S. Role in Selected Meat and Poultry Trade
United States Rank (2006)
The Competition
Beef and veal
No. 1 producer, consumer, and importer;
Australia, long the leading
dropped from no. 2 exporter to no. 8
exporter, was surpassed in 2004
after 2003 BSE case. Is a net importer.
by Brazil.
Pork
No. 3 producer, consumer, and importer;
EU-25 and Canada also in top 3
no. 2 exporter. Is a net exporter.
exporters. Brazil is no. 4.
Broiler meat
No. 1 producer and consumer; no. 2
Brazil overtook U.S. as no. 1
exporter. Few imports.
exporter in 2004.
Turkey
No. 1 producer, consumer, exporter.
No. 2 exporter Brazil is gaining
Few imports.
market share.
Source: USDA, FAS, Livestock and Poultry: World Markets and Trade, March 2006.
Prospective Issues and Options
Feed Prices
Background. Feed is the single largest cost for cattle feeders and dairy, hog,
and poultry producers, who are wary of government policies that can raise feed
prices. These include crop supply control programs to bolster farm prices (rarely
used now) and conservation programs like the Conservation Reserve Program (CRP),
which pays landowners to retire environmentally sensitive cropland for long periods.
4 See CRS Report RL33472, Sanitary and Phytosanitary (SPS) Concerns in Agricultural
Trade, by Geoffrey S. Becker.

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More recently, strong energy prices and a variety of government incentives have
fostered rapid expansion of the U.S. ethanol industry, with national production
increasing from 1.8 billion gallons in 2001 to 4.9 billion in 2006. Corn accounts for
about 98% of the feedstocks currently used in ethanol production in the United
States. USDA estimates that 2.15 billion bushels of corn (or 20% of the 2006 corn
crop) will be used to produce ethanol during the September 2006 to August 2007
corn marketing year.5
The ethanol-driven surge in corn demand has contributed to a sharp rise in corn
prices. For example, the futures contract for March 2007 corn on the Chicago Board
of Trade rose from $2.50 per bushel in September 2006 to a contract high of over
$4.16 per bushel in January 2007 (a rise of 66%). The rapid growth in ethanol
capacity has been fueled by a federal tax credit of 51 cents per gallon of ethanol
blended with gasoline; a Renewable Fuel Standard (RFS) that mandates a renewable
fuels blending requirement for gasoline suppliers that grows annually from 4 billion
gallons in 2006 to 7.5 billion gallons in 2012; and a 54-cent per gallon duty on most
imported ethanol.6
Prolonged higher corn prices could have significant consequences for traditional
feed markets and the livestock industries that depend on those markets. Corn has
traditionally represented about 57% of feed concentrates and processed feedstuffs fed
to animals in the United States.7 As corn-based ethanol production increases, so do
total corn demand and corn prices. Dedicating an increasing share of the U.S. corn
harvest to ethanol production could lead to higher prices for all grains and oilseeds
that compete for the same land, resulting in higher feed costs for cattle, hog, and
poultry producers.
In addition, supply distortions could develop in protein-meal markets related to
expanding production of the ethanol processing by-product distiller’s dried grains
(DDG), which averages about 30% protein content and can substitute in certain feed
and meal markets. While DDG use would substitute for some of the lost feed value
of corn used in ethanol processing, about 66% of the original weight of corn is
consumed in producing ethanol and is no longer available for feed. Further, not all
livestock species are well adapted to dramatically increased consumption of DDG in
their rations — dairy cattle appear to be best suited to expanding DDG’s share in feed
rations; poultry and pork are much less able to adapt. DDG must be dried before it
can be transported long distances, adding to feed costs. There may be some potential
for large-scale livestock producers to relocate near new feed sources, but such
relocations would likely have important regional economic effects.
5 USDA, World Agricultural Oulook Board, World Agricultural Supply and Demand
Estimates (WASDE) Report, Jan. 12, 2007. Available at [http://www.usda.gov/oce/].
6 Much of this section is adapted from CRS Report RL33928, Ethanol and Biofuels:
Agriculture, Infrastructure, and Market Constraints Related to Expanded Production, by
Brent D. Yacobucci and Randy Schnepf. For more information on incentives (both tax and
non-tax) for ethanol, see also CRS Report RL33572, Biofuels Incentives: A Summary of
Federal Programs, by Brent D. Yacobucci.
7 USDA, ERS, Feed Situation and Outlook Yearbook, FDS-2003, April 2003.

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A Tufts University study has offered another perspective on feed prices, noting:
“Any discussion of today’s high prices should take into account the extent to which
these same firms [i.e., leading U.S. meat companies] have benefitted from many
years of feed that was priced well below what it cost to produce. In the nine years
that followed the passage of the 1996 Farm Bill [including the first several years of
the 2002 farm bill] (1997-2005), corn was priced 23% below average production
costs, while soybean prices were 15% below farmers’ costs,” the authors of the study
concluded. This resulted in substantial savings to the poultry and hog industries, and
an implicit subsidy over the nine years of $11.5 billion to the broiler industry and
$8.5 billion to what the authors termed “industrial” hog operations. Thus, “the
leading firms gained a great deal during those years from U.S. agricultural policies
that helped lower the prices for many agricultural commodities.”8
Congressional Consideration. The House Agriculture Subcommittee on
Livestock, Dairy, and Poultry held a hearing to review the impact of feed costs on
March 8, 2007. Among recommendations by livestock industry witnesses were:
allowing the 51-cent ethanol tax credit for blenders to expire after 2010 and the 54-
cent tariff on imported ethanol to expire after 2008; increasing incentives such as
research funds for other types of renewable fuels like cellulosic based biofuels and
methane recapture; and bringing some CRP acres back into crop production.
Although dozens of bills and resolutions relating to renewable energy had been
introduced in the early months of the 110th Congress, only a few of them, including
H.Con.Res. 26/S.Con.Res. 3, H.R. 80, H.R. 1551, H.R. 1766, and S. 828, were
referred to the Agriculture Committees. Not all would necessarily impact feed prices.
The chairman of the House Agriculture Committee has noted that a 2007 farm bill
could conceivably address research and conservation-related policy options, but that
other panels have jurisdiction over tax and tariff policies.
Market Competition and Packer Concentration
Background. The past several decades have seen rapid changes in the
structure and business methods of animal agriculture (see Table 3). Production and
marketing have been moving toward fewer and larger operations, although the pace
of these changes has varied widely across the sectors.
Beef. For example, smaller (i.e., fewer than 100-head) cow-calf operations
(where beef cows are bred and born) represent a majority of such operations and hold
nearly half of all U.S. cattle. On the other hand, larger (i.e., 1,000-head plus
capacity) feedlots, which fatten cattle to slaughter weight, represent a small fraction
of total U.S. feedlots but market the majority of fed cattle.9 Cattle feeding is now
8 Wise, Timothy A., and Elanor Starmer, Industrial Livestock Companies’ Gains from Low
Feed Prices, 1997-2005, Tufts University, Global Development and Environmental Institute,
Feb. 26, 2007, at [http://ase.tufts.edu/gdae]. Bracketed text was added by CRS for
clarification.
9 Animal Production and Marketing Issues: Questions and Answers, USDA, Economic
Research Service Briefing Rooms, at [http://www.ers.usda.gov/Briefing/AnimalProducts/
(continued...)

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concentrated in the middle part of the country, where five states marketed 75% of all
fed cattle: Kansas, Nebraska, Texas, Oklahoma, and Colorado. Although more
widely dispersed, 75% of all U.S. beef cows also reside in the middle states,
stretching, approximately, west to east from Colorado and Utah to Kentucky and
Tennessee, and from the Canadian to the Mexican borders.10
Pork. Live hog production has seen sweeping changes over the past 25 years.
The number of U.S. farms with hogs declined from 667,000 in 1980 to to 67,000 in
2005; those remaining have become much larger and less diversified. Operations
with at least 10,000 hogs now represent less than 1% of all producers but more than
half of total U.S. hog output, USDA reports. The average 1980 farm with hogs had
less than 100 head and likely raised them from birth to slaughter weight as part of a
more diversified crop-livestock operation. In 2005, the average hog farm had more
than 900 head and might typically specialize in a single stage of hog production, such
as finishing, according to USDA. In fact, the hog production segment of the industry
now has about 30 key firms, plus several hundred additional “significant” operators.11
Much of the U.S. hog population is in Iowa, southern Minnesota, and North Carolina.
Table 3. Selected U.S. Livestock Data
1980
2005
Beef:
Total cattle marketed
23.2 million
25.8 million
Beef cow farms & ranches
1,032,592a
770,170
Pct. with 500 or more head
<1%
<1%
U.S. beef cow inventory
35.2 million
33.8 million
Pct. on operations with 500 or more head
14%
15%
Cattle feedlots
113,326
88,198
Pct. with 1,000 or more head
2.1%
2.5%
Pct. marketed from operations with 1,000
70%
86%
or more head
Hogs/pigs:
U.S. hog/pig inventory
62.3 million
60.7 million
Hog/pig farms
667,000
67,000
Average no. of head per farm
93
906
Source: Various USDA data reports. Data on farm numbers differ from those shown in Table 1 due
to use of differing years and farm classifications.
a. 1978 data.
9 (...continued)
questions.htm#question2].
10 Cattle-Fax Update, Dec. 15, 2006.
11 Informa Economics, Special Report: The Changing U.S. Pork industry, November 1,
2004, at [http://www.informaecon.com/LVNov1.pdf].

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Cattle and hog producers now sell to fewer packers as well (see Table 4).
Recent concentration numbers approach those of the early 1900s when 50% to 70%
of the market was dominated by five firms which slaughtered several different
species of livestock.12
Table 4. Red Meat Packer Concentration, 1985 and 2005
Percent Slaughtered by
Type
Top 4 Firms
1985
2005
Hogs
32%
63%
Steers & Heifers
50%
80%
All Cattle
39%
71%
Source: USDA and Cattle Buyers Weekly.
Vertical Marketing Relationships. Ownership or tight control of multiple
production and marketing steps by a single firm (known as vertical integration or
vertical coordination, respectively) is more common in the livestock and poultry
sectors today than in the past. A 2001 article described this characteristic as “supply
chains — tightly orchestrated production, processing, and marketing arrangements
stretching from genetics to grocery. Supply chains bypass traditional commodity
markets and rely on contractual arrangements among the chain participants to manage
the transformation of livestock on the farm to meat in the cooler.”13
This business model was pioneered in agriculture by the poultry industry, which
began to integrate shortly after World War II. Poultry producers were “the clear
leader” in delivering nutritional and convenient products to consumers while at the
same time sharply controlling costs, according to Barkema. The hog industry has
been following poultry’s footsteps. Now typical are contract production
arrangements with large integrators who may provide the genetics, piglets and other
inputs, and a contracting producer (farmer) who provides facilities and labor.
For those who raise livestock, all of these changes have meant fewer cash
transactions at auction barns or other open markets, and more frequent, often longer-
term business arrangements with buyers and/or processors. Often these arrangements
take the form of agricultural contracts, which USDA defines as agreements between
farmers and their commodity buyers that are reached before the completion of
production. Other alternative marketing arrangements also are used by producers and
processors (see “GIPSA Study,” below).
12 USDA, ERS. U.S. Beef Industry: Cattle Cycles, Price Spreads, and Packer
Concentration. Technical Bulletin No. 1874, April 1999.
13 Barkema, Alan, and others, “The New U.S. Meat Industry,” Economic Review of the
Federal Reserve Bank of Kansas City, Second Quarter 2001.

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In 2003, contracts (production or marketing) covered 47% of all livestock
production value, up from 33% in 1991-93. This compares with 31% of all crop
production in 2003 and 25% in 1991-93, according to USDA.
GIPSA Study. A comprehensive study of livestock transaction methods,
released recently by USDA’s Grain Inspection, Packers and Stockyards
Administration (GIPSA), describes a number of “alternative marketing
arrangements” (AMAs). The study defines AMAs as all alternatives to the cash
market, including forward contracts, marketing agreements, procurement or
marketing contracts, production contracts, packer ownership, custom feeding, and
custom slaughter. By contrast, cash transactions are those that occur immediately or
“on the spot.”
The study, conducted by the private contracting firm RTI International,
determined that all types of AMAs accounted for an estimated 38% of fed (slaughter-
ready) beef cattle volume, 89% of finished hog volume, and 44% of lamb volume
sold to packers between October 2002 and March 2005, the period studied. Within
the beef sector, the 29 largest beef packing plants had obtained 62% of their cattle on
the cash or spot market; 29% through marketing agreements; 4.5% through forward
contracts; and 5% through packer ownership or other unknown methods. The use of
one type of AMA — that is, packer ownership of the livestock they intend to
slaughter — accounted for 5% or less of all beef and lamb transactions, but 20% to
30% of all pork transactions, the study found.14
However, the report observed: “Cash market transactions serve an important
purpose in the industry, particularly for small producers and small packers.”
Reported cash prices also are frequently used as the base for formula pricing for cash
market and AMA purchases of livestock and meat, RTI reported.
Critics assert that these types of trends in consolidation and vertical control have
enabled a relative handful of industry players to dominate markets and have
undermined the traditional U.S. system of smaller-scale, independent, family-based
farming. Farmers and ranchers now have weakened negotiating power, lower prices,
and no choice but to “get larger or get out” of agriculture, they add. Others counter
that structural changes in animal agriculture, processing, and marketing are a
desirable outgrowth of factors such as technological and managerial improvements,
changing consumer demand for a wider range of low-cost, convenient products, and
expanding international trade.
Federal Competition Laws. A number of federal laws and agencies are
responsible for ensuring that markets are open and competitive. For example, the
Packers and Stockyards Act (P&S Act) of 1921, as amended (7 U.S.C. §181 et
seq.) prohibits meat packers and poultry dealers from a variety of anti-competitive
and antitrust practices such as engaging in any unfair, unjustly discriminatory or
deceptive marketing; or apportioning supplies or manipulating prices to create a
14 GIPSA, “Livestock and Meat Marketing Study,” accessed April 9, 2007, at
[http://www.gipsa.usda.gov/GIPSA/webapp?area=home&subject=lmp&topic=ir-mms]. The
study was funded by a $4.5 million provision in the consolidated appropriations measure for
FY2003 (P.L. 108-7).

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monopoly. GIPSA administers the P&S Act. The Agricultural Fair Practices Act
(AFPA; 7 U.S.C. 2301 et seq.) was enacted in 1967 to protect farmers from
retaliation by handlers (buyers of their products) because the farmers are members
of a cooperative. The act, administered by USDA’s Agricultural Marketing Service
(AMS), permits farmers, if they believe their rights under the law have been violated,
to file complaints with USDA, which can then institute court proceedings.
The Sherman Act (15 U.S.C. §§1-8) and Clayton Act (15 U.S.C. §12 et seq.),
which cover but are not specific to agriculture, prohibit certain activities such as
mergers and acquisitions that may restrict market access or suppress competition.
The U.S. Department of Justice and Federal Trade Commission are primarily
responsible for administration of these laws. The Capper-Volstead Act (7 U.S.C.
§§291-292) confers limited exemption for antitrust liability to farmer cooperatives.
Congressional Consideration. Small farm advocates have brought several
closely-watched lawsuits, under the P&S Act and several other laws, challenging the
contracting and marketing practices of larger packers and/or integrators. These
efforts generally have not been successful in the courts, adding impetus to calls for
including a so-called competition title in an omnibus 2007 farm bill. Advocates want
lawmakers to strengthen existing antitrust authorities, to impose more mandates on
the executive branch to enforce these authorities, and to provide new contract
protections for farmers, among other options.
Some of these options have been considered previously. In legislative activity
leading to enactment of the last major (2002) farm bill, the Senate Agriculture
Committee voted in November 2001 to delete a competition title from the omnibus
farm bill (S. 1628) proposed by its chairman, Senator Harkin. During subsequent
floor action on the bill, the Senate did approve a number of individual “competition”
amendments. Two such amendments were retained by House-Senate conferees in
early 2002 in the final version of the bill (H.Rept. 107-424). One gives producers the
right to discuss their contracts with family members and advisors. The other extends
some new P&S Act protections to swine producers with production contracts.
Early in the 110th Congress, Senator Harkin introduced a wide-ranging bill (S.
622) that, he said, would be “the basis for developing a proposed competition title
in the new farm bill this year.”15 S. 622 contains provisions establishing a new Office
of Special Counsel at USDA to investigate and prosecute violations of competition
laws; making it easier for producers to prove unfair treatment under the P&S Act;
strengthening P&S Act enforcement in the poultry industry; and rewriting the AFPA
to provide many crop producers with P&S Act-type protections and to set new
requirements for contracts between producers and processors.
Packer Ownership/Captive Supply. Producers facing fewer buyers for
their livestock frequently express concerns about “captive supply,” a reference to
animals that are either owned by, or committed to, a meat packer except for just
before slaughter. When packers buy fewer animals on the spot (open cash) market,
15 Senator Harkin’s statement on S. 622 is in the Feb. 15, 2007, Congressional Record, pp.
S2052-S2053.

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CRS-11
reported prices may no longer accurately reflect the preponderance of prices paid, it
is argued. Reduced transparency (i.e., prices and terms that all market players can
view equally) works to the disadvantage of the far larger number of producers trying
to sell their livestock to the relatively few packers who buy them, it is argued.

Senator Grassley has introduced a bill (S. 305) in the 110th Congress, amending
the P&S Act to prohibit meat packers from owning or feeding livestock “directly,
through a subsidiary, or through an arrangement that gives the packer operational,
managerial, or supervisory control over the livestock, or over the farming operation
that produces the livestock, to such an extent that the producer is no longer materially
participating in the management of the operation...” Exceptions would be for
arrangements made within seven days before slaughter; for producer-owned
cooperatives that also slaughter their livestock; for packers that either slaughter only
at one plant or that fall below a specified size.
Opponents of a packer ownership ban counter that evidence of price
manipulation is lacking, that a ban could reverse many of the efficiency gains made
by the livestock industry in recent years through closer packer-producer alliances, and
that it would limit producers’ marketing options. They also cite the results of the
recently-released RTI study of marketing practices (see above).
Changes to the Agricultural Fair Practices Act. Several bills in the
110th Congress would amend the AFPA to address what their sponsors view as
inequities in contracting between agricultural producers and those who buy their
commodities. The Harkin bill (S. 622) would prohibit the use of confidentiality
clauses in contracts; require them to more clearly spell out producer obligations; give
the producer three days to review or cancel a contract; and limit a processor’s right
to terminate a contract where the producer had made a capital investment of
$100,000 or more in order to satisfy contract requirements. Both S. 622 and a
separate Grassley bill (S. 221) would allow the use of arbitration to settle contract
disputes only if both parties consent to it in writing. Sponsors have argued that such
amendments to the AFPA are needed because agricultural consolidation has left
producers with so few processor-buyers that some of these processor-buyers can and
do impose unfavorable contract terms on the producers, forcing them to either accept
them or go out of business.
Opponents of the various P&S Act and AFPA proposals have asserted that
buyers use these and other contracting arrangements to ensure a steady supply of
animals (or other agricultural commodities) to keep high-capacity plants operating
efficiently; such arrangements also allow for necessary price adjustments for quality,
grade, or other market-prescribed factors. The recent proposals would hurt producers
too, because many of them use contracts or other marketing agreements with packers
to limit their own exposure to price volatility and to obtain capital, opponents added,
again citing the result of the recent RTI study.
The Harkin bill (S. 622) also would significantly alter the AFPA so that it would
cover many crops in much the same way livestock is covered under the P&S Act.
More specifically, it would be unlawful under the AFPA for any covered person (i.e.,
a dealer, handler, contractor, processor or commission merchant) to engage in “[a]ny
unfair, unjustly discriminatory, or deceptive act, device, or anti-competitive practice

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CRS-12
in or affecting the marketing, receiving, purchasing, sale, or contracting for the
production of any agricultural commodity.” Many of the same types of individual
practices now cited under the P&S Act as unlawful for livestock buyers would also
be explicitly cited as unlawful for crop buyers, under the proposed new AFPA.16
Enhanced USDA Enforcement and Management. S. 622 would require
a new USDA Office of Special Counsel for Competition Matters to investigate and
prosecute violations of the AFPA and of the P&S Act. The new Special Counsel,
who would have to be confirmed by the Senate, also would have to consult with the
Department of Justice and the Federal Trade Commission on competition matters
affecting food and agriculture. S. 622 also contains language intended to make it
easier for producers to prove in a court of law that they were treated unfairly by
packers.
Sponsors of this proposal say that stronger enforcement authorities are needed
in part because GIPSA officials have largely failed to enforce existing laws. They
point to a recent report by the Department’s Office of Inspector General (OIG), which
concluded that GIPSA has not adequately overseen and managed its investigative
activities. GIPSA had difficulties defining and tracking investigations, planning and
conducting complex investigations, and making agency policy, OIG found. USDA’s
general counsel had not filed an administrative complaint on anti-competitive
practices since 1999, due to GIPSA’s failure to refer cases, although agency staff
were considering dozens of investigations at the time, OIG concluded.17
Livestock Mandatory Price Reporting
Background. Under the Agricultural Marketing Act of 1946 (7 U.S.C.
1621-1627), AMS has long collected livestock and meat price and related market
information (along with data on commodities such as grains, dairy, and produce).
Under the voluntary program, this information has been disseminated by AMS
through hundreds of daily, weekly, monthly, and annual written and electronic
reports. The goal has been to provide all buyers and sellers with accurate and
objective market information.
In 1999, Congress passed the Livestock Mandatory Price Reporting (LMPR) Act
as Title IX of USDA’s FY2000 appropriations act (P.L. 106-78). Its aim was to
address some livestock producers’ concerns that this voluntary system was no longer
working, at a time when animals were more frequently being sold under private
marketing arrangements, with prices not publicly disclosed or reported. These
producers had asserted that such arrangements made it difficult or impossible for
them to determine “fair” market prices. Other producers, and many firms who
bought their animals, at first had opposed a mandatory law, arguing that it would
impose costly new reporting burdens on the industry and could cause the release of
confidential company information, among other concerns. Nonetheless, they
16 S. 622 would not cover crops regulated under the Perishable Agricultural Commodities
Act (7 U.S.C. 499a et seq.), i.e., fresh and fresh frozen fruits and vegetables.
17 Grain Inspection, Packers and Stockyards Administration’s Management and Oversight
of the Packers and Stockyards Programs, OIG Audit Rept. No. 30601-01-Hy, January 2006.

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CRS-13
eventually accepted a new “consensus” law and generally have supported its
continuation.
LMPR contains a variety of reporting requirements. For example, detailed
market information must be reported to AMS by packers, processors and importers
who annually slaughter an average of at least 125,000 cattle, 100,000 hogs, or 75,000
lambs, and by importers with average annual imports of at least 2,500 metric tons of
lamb meat (Reportedly a total of more than 100 packers or importers are covered.)
There are penalties for not reporting. The program has received some 500,000 pieces
of data each day; USDA in turn has made the data public through more than 100
daily, weekly, or monthly reports. The program has captured information from
85-90% of the boxed beef market, 75% of the lamb meat market, 75-80% of the steer
and heifer cattle market, 60% of the lamb market, and 95% of the hog market, USDA
officials testified in 2005.
The original authority had lapsed several times — but the “mandatory” program
continued on a “voluntary” basis” — before the Senate, on September 2006, agreed
to a House-passed version (H.R. 3408) extending LMPR with relatively minor
changes through September 30, 2010. This measure was signed into law (P.L. 109-
296) on October 5, 2006. Some Senators had wanted a shorter extension in order to
consider more substantive amendments to the law.18
Congressional Consideration. A few Members of Congress have
indicated the need for further changes in LMPR; these could be debated in the
context of the farm bill. Meanwhile, Senator Grassley has introduced S. 786, which
would amend the Agricultural Marketing Act of 1946 to require certain meat packers
to obtain at least 25 percent of the animals they slaughter each day from the spot
(cash) market. Packers that would have to comply are those now covered by LMPR
(see above).
Country-of-Origin Labeling
Background. Under §304 of the Tariff Act of 1930 as amended (19 U.S.C.
1304), every imported item must be conspicuously and indelibly marked in English
to indicate to the “ultimate purchaser” its country of origin. Some types of products
have long been exempted from this requirement, including raw agricultural products
such as live animals, meat, poultry, fruits and vegetables, for example — although
their outer containers must contain such labeling.
Title X of the 2002 farm bill was to change this, by requiring retailers to provide
country-of-origin labeling for fresh beef, pork, and lamb (Section 10816 of Subtitle
I).19 First adopted on the Senate floor in late 2001, mandatory country-of-origin
labeling (COOL) for meat was to be in place on September 30, 2004, but language
in the FY2004 consolidated appropriations act (P.L. 108-199) delayed
implementation for meats, produce and peanuts, but not seafood, for two years, until
18 See CRS Report RS21994, Livestock Price Reporting: Background, by Geoffrey S.
Becker.
19 The mandatory COOL provision also covers seafood, fruits and vegetables, and peanuts.

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CRS-14
September 30, 2006. Debate over COOL carried into the 109th Congress, which (in
USDA’s FY2006 appropriation, P.L. 109-97) postponed implementation for an
additional two years, until September 30, 2008. This highly contentious program
could again be on the farm bill agenda of the 110th Congress.20
The delays reflect the continuing divergence of opinion among lawmakers over
whether a federally-mandated labeling program is needed. Some contend that
mandatory COOL will provide U.S. products with a competitive advantage over
foreign products because U.S. consumers, if offered a clear choice, prefer fresh foods
of domestic origin, thereby strengthening demand and prices for them. Moreover,
proponents — including producer groups like the National Farmers Union and R-
CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of
America), and consumer advocacy organizations — argue that U.S. consumers have
a right to know the origin of their food, particularly at a time when U.S. food imports
are increasing, and whenever particular health and safety problems arise. They cite,
as one prominent example, concerns about the safety of some foreign beef arising
from the discoveries of BSE in a number of Canadian-born cows (and two U.S.
cows) since 2003. Supporters of the COOL law argue that it is unfair to exempt
meats and produce from the longstanding country labeling already required of almost
all other imported consumer products, from automobiles to most other foods. They
also note that many foreign countries already impose their own country-of-origin
labeling.
Opponents of mandatory COOL — which include the American Meat Institute
representing many in the packing industry, the Food Marketing Institute representing
many retail stores, and producer groups like the National Cattlemen’s Beef
Association and National Pork Producers Council — counter that studies do not
provide evidence that consumers want such labeling. They believe COOL is a thinly
disguised trade barrier intended to increase importers’ costs and to foster the
unfounded perception that imports may be inherently less safe (or of lower quality)
than U.S. products. Some argue that food safety problems can as likely originate in
domestic supplies as in imports, as evidenced by the more than 30 recalls of U.S.
meat and poultry products announced by USDA in 2006 alone. Opponents point out
that all food imports already must meet equivalent U.S. safety standards, which are
enforced by U.S. officials at the border and overseas; scientific principles, not
geography, must be the arbiter of safety. Industry implementation and recordkeeping
costs, estimated by USDA to be as high as $3.9 billion in the first year and $458
million per year after that, would far outweigh any economic benefits, critics add,
noting that the law does not cover red meats that are processed or sold in restaurants,
or any type of poultry, a competing product.21 (COOL proponents assert that USDA
exaggerated the implementation costs.)
20 AMS is responsible for implementing the rules, and maintains an extensive website on
COOL (at [http://www.ams.usda.gov/cool/]), with links to voluntary COOL guidelines, the
seafood rule, the proposed mandatory rule for the other covered commodities, and a
cost-benefit analysis.
21 USDA’s cost estimates are from 68 Federal Register 61955-61974.

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CRS-15
Congressional Consideration. Bills in the 109th Congress would have
made COOL voluntary for meats (including H.R. 2068, S. 1300, and S. 1333). Still
others (e.g., S. 135, S. 1331) would have expanded COOL requirements and/or
accelerated its current implementation date. None was adopted by Congress.
In the 110th Congress, supporters have introduced bills (H.R. 357; S. 404) to
mandate COOL by September 30, 2007. The House Agriculture Committee
Chairman reportedly has stated that an acceleration of the current implementation
date may not be feasible and that some changes in the mandatory program should be
considered — although not necessarily in the farm bill. He has also speculated on
whether COOL and a universal animal identification system, the latter to address
animal health problems, might be combined into a single program (see next
section).22
Animal Identification for Health Protection
Background. One aspect of the COOL debate has been whether animal
producers would have to keep detailed records on their animals’ identity and
whereabouts so that the government or retailers could properly verify country of
origin. Many producers do not believe that USDA should extend such requirements
to the farm level, arguing they are intrusive, costly, and unnecessary in meeting the
intent of the law. (In fact, the mandatory COOL law prohibits mandatory animal ID
for COOL purposes.) At the same time, a growing number of producers seems to
agree that some type of universal animal identification (ID) program would be a
beneficial tool in addressing animal disease problems.
Outbreaks of animal diseases like avian influenza (AI), foot and mouth disease
(FMD), brucellosis, and tuberculosis are seen as perhaps the greatest potential threats
to animal production. Even where U.S. cases have been few (as with BSE) or
quickly contained (as with various strains of AI), the impacts can be devastating
economically, causing production losses, the closure of export markets, and a decline
in consumer confidence. Some like AI and BSE have the potential to harm humans.
USDA’s Animal and Plant Health Inspection Service (APHIS) has lead
responsibility on matters of animal health, including animal ID. APHIS has been
working on such a program, indicating that it has the legislative authority to
implement an animal ID program under the comprehensive Animal Health Protection
Act, which was adopted as Subtitle E of Title X of the 2002 farm bill. This subtitle
updated and consolidated a number of longstanding statutes that had been used to
monitor, control, and eradicate animal diseases.23
22 See for example “Mandatory Country-of-Origin Labels May Have to Wait a Year After
All,” The Webster Agricultural Letter, Mar. 16, 2007; “Does animal ID + COOL = marriage
made in heaven?” Food Chemical News, Mar. 26, 2007. Also see CRS Report 97-508,
Country-of-Origin Labeling for Foods, by Geoffrey S. Becker.
23 See CRS Report RL32012, Animal Identification and Meat Traceability, by Geoffrey S.
Becker.

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CRS-16
Despite several years of effort on the part of USDA, as well as industry groups,
and states — and public funding totaling an anticipated $118 million through
FY2007 — a universal U.S. system is not expected to be in place for some time, as
policymakers attempt to resolve numerous questions about its design and purpose.
Should animal ID be mandated? (USDA currently envisions a voluntary universal
system.) What types of information should be collected, on what animal species, and
who should hold it, government or private entities? To what extent should producer
records be shielded from the public and other government agencies? Should animal
ID be expanded to traceability of meat and poultry products from farm to the
consumer, or used for other purposes such as food safety or certification of labeling
claims? How much will it cost, and who should pay?
Congressional Consideration. Past bills to establish differing animal
health-oriented ID systems, and others to require more extensive systems tracing
products through the marketing chain, may re-emerge in the 110th Congress, possibly
as a farm bill item. As of early April 2007, one bill, H.R. 1018, had been introduced
on the topic; it would prohibit USDA from carrying out a mandatory animal ID
program and also would seek to protect the privacy of producer information under
a voluntary system.
Animal Welfare
Background. Farm animals are not covered by the Animal Welfare Act
(AWA; 9 U.S.C. §2131 et seq.), which requires minimum care standards for most
types of warm-blooded animals bred for commercial sale, used in research,
transported commercially, or exhibited to the public. The Animal Care Division of
APHIS has primary responsibility for enforcing the AWA and several other animal
welfare statutes, including the Horse Protection Act (15 U.S.C. §1821 et seq.)
Farm animals are subject to the Humane Methods of Slaughter Act (7 U.S.C.
1901 et seq.), enforced by USDA’s Food Safety and Inspection Service (FSIS). The
act governs the humane slaughter and handling of livestock (but not poultry) at
packing plants. Also, under the so-called Twenty-Eight Hour Law (49 U.S.C. 80502,
last amended in 1994), commercial carriers may not confine animals in a vehicle or
vessel for more than 28 consecutive hours without unloading the animals for feeding,
water, and rest.
Generally, many members of the House and Senate Agriculture Committees
have expressed a preference for voluntary approaches to humane methods of farm
animal care. They state that major food industry players have been developing
humane animal care guidelines, and imposing them on their suppliers, in response to
a growing number of customers who ask about animal treatment. They cite such
changes at McDonald’s and Burger King, for example. In January 2007, Smithfield,
the nation’s largest pork producer, announced that its Murphy-Brown subsidiary
would phase out over a 10-year period the use of individual gestation stalls for sows,
replacing them with group housing.24
24 “Smithfield Foods Makes Landmark Decision Regarding Animal Management,” January
(continued...)

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CRS-17
Animal activists have continued to challenge current production practices. They
periodically seek new legislation that would further regulate on-farm or other animal
activities, such as bills to prohibit the slaughter of horses for human food (which
passed the House as H.R. 503 in September 2006); to require the federal government
to purchase products derived from animals only if they were raised according to
specified care standards; and to prohibit the slaughter for food of disabled livestock,
among others. Agricultural interests recognize that animal welfare advocacy
organizations, like the Humane Society of the United States and others, have large
constituencies in many Members’ districts, and these organizations have claimed
some successes in recent years in winning animal care initiatives in several states and
in several lawsuits.
Congressional Consideration. Animal welfare provisions are, on
occasion, placed in farm bills. Title XVII, Subtitle F of the 1985 farm bill (P.L.
99-198) directed the Secretary to set new minimum standards of (nonfarm animal)
care for handling, housing, feeding, water, sanitation, ventilation, and so forth; and
increase penalties for AWA violations, among other things. Section 2503 of the
1990 farm bill (P.L. 101-624) extended certain pet protections. The amendments
also increased civil and criminal penalties for AWA violations. Title X of the 2002
farm bill (P.L. 107-171): called on USDA to fully enforce the Humane Methods of
Slaughter Act (§10305); excluded birds, rats and mice, and horses not used for
research, from AWA coverage (§10301); delineated prohibitions on interstate
movement of animals for fighting (§1302); and required USDA to report on the
humane treatment of nonambulatory livestock (§10815).
Pending in the 110th Congress are companion bills (H.R. 503, S. 311) to ban the
slaughter of horses for food, even though court actions by advocates have forced the
closing of the two foreign-owned plants in Texas and one in Illinois that were
processing horses for export markets.25 Also pending are bills (S. 394 and H.R. 661)
that would require that all nonambulatory livestock (i.e., those that are unable to
stand up and walk) be humanely euthanized and banned from food use. USDA now
prohibits, but by regulation, the slaughter for food of nonambulatory cattle only, as
a safeguard against the possibility of introducing BSE into the food supply. Another
bill (H.R. 1726) would require those who supply meat, dairy products, or eggs to
federal programs like the military, school lunch and federal prisons to meet basic
animal welfare requirements, including housing standards. Whether these or other
legislative proposals might be offered during debate on a new farm bill remains to
be seen, but such action would be more likely to occur on the House and Senate
floors than in the Agriculture Committees.
24 (...continued)
25, 2007 press release, at [http://www.smithfieldfoods.com/Enviro/Press/press_view.asp?
ID=394].
25 “Ruling effectively bans slaughtering horses for export,” The Courier-Journal, Louisville,
KY, Mar. 31, 2007. USDA’s Food Safety and Inspection Service confirmed in an Apr. 9,
2007 e-mail that the three plants are no longer slaughtering horses for human consumption.

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CRS-18
Environmental Issues
Background. Questions about the applicability of federal environmental laws
to livestock and poultry operations have drawn congressional attention. As animal
agriculture increasingly concentrates into larger, more intensive production units,
interest arises about impacts on the environment, including surface water,
groundwater, soil, and air. Some environmental laws specifically exempt agriculture
from regulatory provisions, and some are designed so that farms escape most, if not
all, of the regulatory impact. The primary regulatory focus for large feedlots is the
Clean Water Act (33 U.S.C. §1251 et seq.), since contaminants from manure, if not
properly managed, also affect both water quality and human health.
Operations that emit large quantities of air pollutants may be subject to Clean
Air Act (42 U.S.C. §§7401-7671q) regulation. In addition, concerns about
applicability of Superfund (the Comprehensive Environmental Response,
Compensation, and Liability Act (the Superfund law, 42 U.S.C. §§9601-9675) to
livestock and poultry operations are of growing interest.
Congressional Consideration. Bills (S. 807; H.R. 1398) to exempt animal
manure from federal Superfund requirements have re-emerged in the 110th Congress.
These bills were referred, respectively, to the Senate Committee on Environment and
Public Works, and the House Committees on Energy and Commerce and on
Transportation and Infrastructure. The House and Senate Agriculture Committees
do not have direct jurisdiction over federal environmental law, but they do have a
role in the issue. For example, under the conservation title of recent farm bills, the
Environmental Quality Incentives Program (EQIP) has provided financial and
technical assistance to farmers to protect surrounding resources; livestock receives
60% of the funds. It is also conceivable that supporters of S. 807 and H.R. 1398, or
similar measures, could seek their inclusion in either an omnibus farm bill or other
agricultural bill in the 110th Congress.26
26 Also see CRS Report RL31851, Animal Waste and the Environment: EPA Regulation of
Concentrated Animal Feeding Operations (CAFOs); CRS Report RL32948, Air Quality
Issues and Animal Agriculture: A Primer; and CRS Report RL33691, Animal Waste and
Hazardous Substances: Current Laws and Legislative Issues, all by Claudia Copeland.

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