Animal Agriculture: Issues in the 107th Congress

Animal Agriculture: Issues in the 107th Congress

Order Code IB10063
Issue Brief for Congress
Received through the CRS Web
Animal Agriculture: Issues in the 107th Congress
Updated January 29, 2003
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
USDA Actions
Farm Bill
Check-Offs
Beef
Pork
Farm Bill
Competition and Industry Structure
Concentration and Structure
Government Response
In Congress
Farm Bill
Banning Packer Ownership of Livestock
In Congress
Mandatory Price Reporting
Trade
Russia (Poultry)
Europe (Beef)
Country-of-Origin Labeling
USDA Actions
Environment
Farm Bill
Animal Health
“Mad Cow” Disease
Foot-and-Mouth Disease
Humane Slaughter
Farm Bill
LEGISLATION
FOR ADDITIONAL READING

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Animal Agriculture: Issues in the 107th Congress
SUMMARY
A variety of animal agriculture issues,
banning packer ownership of livestock was
including prices, the impact of consolidation
dropped in conference, but the issue may
in the meat production/packing industry, trade,
resurface in future legislative proposals.
and the environmental impacts of large feed-
lots, generated interest in the 107th Congress.
The FY2001 USDA appropriations law
(P.L. 106-387) contained a mandatory price
The farm bill (P.L. 107-171; H.R. 2646),
reporting provision that requires large meat
signed by the President on May 13, 2002,
packers to report prices they pay for cattle and
contains several provisions affecting animal
hogs, among other provisions. The provision
agriculture, including protections for contract
was implemented on April 2, 2001, but prob-
growers, disaster assistance, country-of-origin
lems arose with reporting of prices. USDA
labeling, and increased funding for conserva-
has implemented changes to fix those prob-
tion purposes.
lems and increased the frequency of reporting.
USDA announced on September 19,
On August 23, 2002, USDA announced
2002, that it would provide $752 million from
Russia lifted a ban on U.S. poultry imports
Section 32 funds for a new 2002 Livestock
that had been in place since March 10, 2002.
Compensation Program. In early December,
The ban stemmed from Russian concerns over
total funding was increased to $937 million.
antibiotics in feed and the use of chlorinated
The program is designed to compensate live-
water during processing. Disputes continued
stock producers experiencing severe 2001 and
with the European Union over its barriers to
2002 feed and pasture losses.
U.S. meat and poultry imports despite a WTO
ruling that these barriers violate the WTO
Checkoff programs, which fund market-
agreement.
enhancing activities, continued to face legal
challenges, with the beef and pork checkoff
On December 16, 2002, the Environmen-
programs the subject of court cases. The pork
tal Protection Agency announced new permit-
checkoff program was reinstated on February
ting controls that would apply to concentrated
28, 2001, in an agreement reached between
animal feeding operations. The proposal
USDA and the National Pork Producer’s
includes the objectives of preventing
Council. Former Secretary Glickman had
discharges from manure-storage lagoons, and
ordered the checkoff canceled after it was
limiting the spreading of manure to protect
voted down in a disputed producer referen-
waterways.
dum.
Outbreaks of foot-and-mouth disease and
Concerns about the impact of consolida-
findings of mad cow disease in Europe deep-
tion in the livestock industry and the agricul-
ened concerns about the United States’ ability
tural sector overall, spurred legislative inter-
to prevent these diseases or eradicate them
est. In the farm bill, a contentious provision
should an outbreak occur.
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MOST RECENT DEVELOPMENTS
On December 16, 2002, the Environmental Protection Agency announced new
permitting controls that would apply to concentrated animal feeding operations. The
proposal includes the objective of preventing discharges from manure-storage lagoons, and
limiting the spreading of manure to protect waterways. Federal funding is available to
producers to help with compliance costs.
USDA announced on September 19, 2002, that it would provide $752 million for a new
2002 Livestock Compensation Program. In early December, USDA added $185 million in
available funding to the program, bringing potential total payments to $937 million. The
program is designed to compensate livestock producers experiencing severe 2001 and 2002
feed and pasture losses, with funding coming through Section 32 funds.
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, projections were lower ($97 billion and almost
49%) according to the U.S. Department of Agriculture’s (USDA) Economic Research
Service (ERS).
ERS analysts expected final hog prices to average in the mid-$30s for 2002. In earlier
reports, hog prices were projected downward with prices approaching those experienced in
1998 and 1999, although now
M e a t a n d P ou ltr y Pr o du c tion an d P ri c es
prices are not expected to
B e e f
2 00 3
2 00 2
200 1
average below $30. The U.S.
P rod uc t ion (b il lio n po und s)
25 .7
27 .1
2 6.1
sheep inventory continued to
Fe d ste e rs ($ /h und re d pou nds)
$7 2-7 7
$ 67
$7 3
decline while lamb and mutton
Fe e de r st e e rs ($ /hu nd re d p oun ds)
$8 4-8 9
$ 80
$8 8
imports continued to increase,
Pe r c ap ita co nsu mp tion (po und s)
64 .3
67 .5
6 6.2
with most imports coming from
P or k
Australia and New Zealand.
P rod uc t ion (b il lio n po und s)
19 .4
19 .7
1 9.1
Broiler prod u c t i on was
M a rke t pric e ( $/hun dre d po und s)
$3 5-3 8
$ 35
$4 6
moderating, but before any
Pe r c ap ita co nsu mp tion (po und s)
50 .1
51 .3
5 0.2
slowdown in production can
S hee p
P rod uc t ion (m il lio n p oun ds)
2 17
2 20
22 3
translate into higher prices, the
Fa rm p ric e ( $/hun dre d po und s)
$7 0-7 5
$ 72
$7 2
supply of parts held in cold
Pe r c ap ita co nsu mp tion (po und s)
1. 2
1 .2
1 .1
storage (due to reduced exports
B r oile r s
to Russia) needed to be reduced,
P rod uc t ion (b il lio n po und s)
32 .7
32 .3
3 1.3
according to ERS. Prices for
M a rke t pric e ( ¢/po und )
57 -61 ¢
55 .5¢
59 .1 ¢
broilers and broiler parts were
Pe r c ap ita co nsu mp tion (po und s)
80 .1
80 .0
7 6.5
expected to gradually strengthen
T ur ke y
over the next several months,
P rod uc t ion (b il lio n po und s)
5. 7
5 .7
5 .6
based on the forecast of smaller
M a rke t pric e ( ¢/po und )
64 -69 ¢
64 .5¢
66 .3 ¢
gains in broiler production
Pe r c ap ita co nsu mp tion (po und s)
17 .6
17 .6
1 7.5
during the first half of 2003 and
expected lower output in the beef and pork sectors.
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Industry Issues
Emergency Assistance 1,2
Many of the Western, Great Plains, and Eastern states were affected by persistent
drought in 2002, which had an impact on the regions’ crop and livestock production. USDA
offered 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 calendar year 2000 production losses, Congress
had considered making assistance available for 2001 and 2002 losses. Although no action
was taken in the 107th Congress, the issue was expected to be considered again early in the
108th Congress. If such assistance is provided using the same payment formula that was used
for 2000 losses, government costs could reach $6 billion (for crops and livestock).
At issue was whether proposed ad-hoc disaster assistance should be provided without
equivalent reductions in spending on other programs. Proponents of additional assistance
claim that available programs were not adequately addressing farmers’ needs. The President
stated that the new farm spending authorized by the omnibus 2002 farm bill (P.L. 107-171)
—estimated at $52 billion over six years by the Congressional Budget Office (CBO)— could
provide adequate farm commodity support, and that any additional assistance should be
offset with reductions in other spending.
In Congress. The 107th Congress adjourned without taking final action on a disaster
assistance package. 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 $6 billion in crop and livestock disaster assistance to farmers for both 2001 and
2002 production year losses. The bill did not clear the Senate floor. The adopted Daschle
amendment would have provided "such sums as are necessary" to fully fund crop and
livestock disaster payment formulas that were last used for 2000 production losses, at a
CBO-estimated cost of $5.95 billion ($4.5 billion for crop assistance and $1.45 billion for
livestock assistance). The House-passed version of H.R. 5093 contained no comparable
disaster provisions.
USDA Actions. USDA implemented several administrative measures to help mitigate
the financial effects of drought and other natural disasters. USDA announced on September
19, 2002, that it would provide $752 million for a new 2002 Livestock Compensation
Program (LCP). In early December 2002, USDA added $185 million in available funding
to the program, bringing potential total payments to $937 million. The program was
designed to compensate livestock producers experiencing severe 2001 and 2002 feed and
pasture losses. USDA began accepting applications on October 1, 2002, and continued to
1 CRS contact: Ralph Chite 7-7296.
2 Please see Electronic Briefing Book on Farm Disaster Assistance at:
[http://www.congress.gov/brbk/html/ebagr48.html]
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do so until December 13, 2002. As of December 16, 2002, $738 million of the $937 million
available in the program had been obligated to livestock growers. Of the amount obligated,
approximately 45% of the total has been disbursed in six states: Nebraska ($63.0 million),
Oklahoma ($58.8 million), Missouri ($58.0 million), Texas ($55.4 million), Kansas ($53.4
million), and South Dakota ($50.3 million).
Under the program, direct payments were being made to producers of beef, dairy, sheep,
and goats in any county declared a disaster area by the Secretary between January 1, 2001
and September 19, 2002 (including disaster designation requests pending on September 19,
2002 that are approved subsequently). The payment rates are $31.50 per adult dairy cattle,
$18 per adult beef cattle, $13.50 for certain livestock over 500 lbs, and $4.50 per sheep or
goat. Payments are limited to $40,000 per person, and are not made to any person with
qualifying gross revenue over $2.5 million. Funding for the program is provided through
Section 323 funds, which originate from a portion of customs receipts that are made available
to USDA to support the farm sector through various activities.
Additionally, on September 9, 2002, USDA announced it would 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 had 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.
USDA also exercised its standing authority to release a portion of its inventory of nonfat
dry milk purchased under the dairy price support program, which was converted into $150
million of livestock feed and provided to certain drought-stricken states. USDA also allowed
all farmers and ranchers nationwide to cut hay and graze livestock until November 30, 2002
on acreage that was set aside for certain conservation use. Emergency grazing was extended
until December 31, 2002, in Colorado, Texas, Utah, and Washington.
Farm Bill. The 2002 omnibus farm law permanently authorizes livestock assistance,
subject to annual appropriations, and at the discretion of the Secretary of Agriculture (Sec.
10104).
Check-Offs4
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
3 Please see CRS Report RS20235, Farm and Food Support Under USDA’s Section 32 Program.
4 Please see CRS Report 95-353 Federal Farm Promotion (“Check-off”) Programs.
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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 potentially 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
2003, and if 15% of producers and importers favor a binding referendum, it will be held
within one year.5
Legal challenges to the pork check-off continue. In October 2002, a U.S. District Judge
in Michigan ruled that the check-off violates free speech, and ordered a halt in collection of
funds, effective November 25. The Department of Justice requested the Sixth Circuit Court
of Appeals for a stay on the ruling, which was granted, allowing collections to continue,
awaiting the appeals process.
On September 16, 2002, USDA published a final rule (effective September 30, 2002)
in the Federal Register to reduce the assessment rate from 0.45% (45 cents per $100 of hog
market price) to 0.40%, as recommended by the National Pork Producers Delegate Body.
USDA also decreased assessments on imported pork and products to reflect the combined
effect of the increase in the 2001 average price for domestic barrows and gilts and the
proposed 0.05% decrease in the assessment rate. The assessment decrease will decrease
annual funding of the check-off program by an estimated $5-$6 million annually with an
estimated $290,000 decrease in importer assessments.
Farm Bill. Section 10607 of the farm law exempts from any commodity check-offs
persons who produce and market 100% organic products.
5 Additional information about the settlement and related issues is available at:
[http://www.ams.usda.gov/lsg/mpb/pork.htm].
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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 concerning 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 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
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facilities and increasing share of production by those larger facilities, may be a factor in more
stable hog prices. To expand production, the large producers face a more complicated
process than in the recent past, and the process is much more complicated than for the
smaller producers. Expansion processes now include securing large-scale financing,
obtaining building and waste management permits from state and local authorities, and hiring
and training staff. In contrast, 15 to 20 years ago many smaller producers maintained multi-
use buildings for rapid re-population of a hog herd when returns turned favorable. Necessary
construction was accomplished without complicated procedures needed to manage waste.
Family labor typically provided adequate supplies of skilled herdsmen. The factors that
affect expansion patterns today are likely those that are muting the peaks and valleys of the
hog cycle.
The poultry industry has been almost entirely vertically integrated for 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
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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,
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. 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.
In Congress. In the 107th Congress, 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
6 U.S. Government Accounting Office. RCED-00-242: Packers and Stockyards Programs: Actions
Needed to Improve Investigations of Competitive Practices. September 2000.
7 Please see CRS Report RL31553, Livestock: A Proposed 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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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).
The Senate Agriculture Committee held a hearing on banning packer ownership on July
16, 2002, and the Senate Judiciary Committee held a field hearing on August 23, in South
Dakota. The proposed packer ban might generate legislative interest in the 108th Congress.
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
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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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.
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 was lifted formally on 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.
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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The WTO authorized U.S. retaliation of $117 million and the EU offered to compensate the
United States by enlarging the 20,000 tonne quota for non-hormone treated (NHT) beef in
lieu of lifting the ban. The United States, however, has maintained that compensation, unless
contingent on removing the ban, is unacceptable.
Country-of-Origin Labeling14
Expanded labeling requirements have attracted 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.
USDA Actions.15 On September 11, 2002, USDA published guidelines for voluntary
country of origin labeling (COOL) in the Federal Register (67 FR 63367), in accordance
with requirements of the new 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.
On November 21, 2002, USDA published a notice and request for public comment in
the Federal Register (67 FR 70205), on possible COOL costs. Total costs for COOL record-
keeping were estimated at $1.968 billion, with $1 billion for producers, $340 million for food
handlers, and $628 million for food retailers
Environment16
Dramatic changes in the livestock industry during the past four decades, but accelerating
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 the larger livestock facilities and a greater portion of the herds and flocks are
14 Please see CRS Report 97-508, Country-of-Origin Labeling for Foods: Current Law and
Proposed Changes.
15 Please see AMS website for further information: [http://www.ams.usda.gov/cool/].
16 CRS contacts: Jeff Zinn 7-7257, and Claudia Copeland 7-7227.
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concentrated. One issue has been whether all the waste is (or can be) handled in ways that
minimize environmental problems. A second issue has been what to do when the available
land in some areas where herds and flocks are concentrated is insufficient to assimilate all
the manure and other waste. Where the volume of wastes exceeds the land’s capacity,
spreading it on fields or storing it can lead to excessive chemical and nitrogen runoff into
surface or subsurface waters, and result 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 1997.17
However, only about 4,500 of these operations currently are covered by permits, according
to EPA. EPA’s CAFO definition also include smaller facilities in certain physical settings;
smaller CAFOs have either 300 to 999 AU or fewer than 300 AU. EPA estimates that the
number of CAFOs subject to regulation will continue to grow rapidly and that about 15,500
operations will need permits by 2006.
Under the federal Clean Water Act, 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. Environmental groups
brought a suit in response to a lack of implementation that culminated in a judicial consent
decree in 1992, requiring final regulations to be issued by December 15, 2002. On December
15, 2000, EPA under the Clinton Administration had proposed a set of rules. EPA held eight
public meetings across the country to gather public comment on that proposal. The Bush
Administration met the court deadline by announcing a final rule on December 16, 2002.18
This final rule has some major differences from the earlier proposal.
Under the final rule, all CAFOs must apply for a permit by December 2006, from the
state agency administering an authorized National Pollutant Discharge Elimination System
permit program in 45 states, or directly from EPA in the other 5 states. EPA will be giving
states considerable implementation flexibility. However, it points out that the permitting
requirements will be stricter than under the old rule, and that the proposed rule will include
17 The equivalents for 1,000 animal units are: 1,000 cattle; 700 dairy cows; 2,500 hogs; 10,000
sheep; 125,000 broilers; 82,000 laying hens; and 55,000 turkeys.
Under the prior permit rules, a CAFO had to meet all the following criteria to be subject to EPA
rules:
–Animals are stabled or confined and fed for 45 days or more in a 12- month period;
–Vegetation is not sustained during the normal growing season on any portion of the lot or facility
(i.e., animals are not maintained in a pasture or on rangeland);
–Feedlots hold more than 1,000 animal units (AU) (or between 300 and 1,000 AU if pollutants are
discharged from a manmade conveyance or are discharged directly into waters passing over, across,
or through the facility). Also, animal feeding operations that include fewer than 300 AU may be
designated as CAFOs if they pose a threat to water quality or use.
18 For more information on the final rule, see [www.epa.gov/npdes/caforule].
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several new controls on waste discharges and land applications of waste.19 All CAFOs will
be required to develop and implement nutrient management plans, to carry out best
management practices under those plans, and to submit annual reports. Large CAFOs will
have to keep records for any manure transferred to another party. The rule will eliminate
three exemptions that excused CAFOs from permits under the prior rule if they discharged
only during large storms; if they raised chickens using dry manure handling systems; or if
they were excluded because they did not need to count immature swine and immature dairy
cows for purposes of this program.
EPA estimates that CAFOs produce about 220 billion gallons of manure annually. The
proposed regulation is predicted to reduce the volume of nitrogen released into the
environment by more than 100 million pounds and the phosphorous by more than 56 million
pounds. In addition, over 2 billion pounds of sediment and nearly 1 million pounds of metals
will not be released, according to the EPA analysis. Compliance costs to CAFO operators
is estimated to be $355 million annually, while the annual benefits from implementation are
estimated to range from $204 million to $355 million.
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 from $200
million in FY2001 and $400 million in FY2002 to $1.3 billion in the final year. It provides
60% of the funding each year to issues related to livestock production.20 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.
Farm groups generally were pleased that the final rule is more flexible than earlier
proposals, but continue to express concerns about implementation costs. EPA’s press release
pointed out that the rule does not include co-permitting requirements, national ground water
requirements, certification by recipients of transferred manure, or mandatory requirements
on when manure may be applied to frozen, snow-covered, or saturated ground.
Environmental critics believed that greater regulation is warranted and complained that
these rules will accomplish far less than earlier proposals. More specifically, they expressed
concern about the lack of any minimum standards, the wide range of flexibility for state
administering agencies, the lack of updated technology standards, and the lack of public
review of nutrient management plans for individual farms. They concluded that large farms
likely will be able to continue to discharge wastes at unacceptable levels.
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 starting in FY2003. Three levels, or tiers, of conservation and
19 Please see CRS Report RL30437, Water Quality Initiatives and Agriculture.
20 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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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 Health21
“Mad Cow” Disease22
“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.23
As of December 2000, the importation of all rendered animal protein products (whether from
ruminants or not) is prohibited. The Food and Drug Administration (FDA), which regulates
animal feed ingredients domestically, banned the feeding of virtually all mammalian proteins
to ruminants in August 1997. However, an FDA survey in 2000 showed that full compliance
has been difficult to achieve. In January 2001, a group of meat industry associations,
including the 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.
21 CRS contacts: Jean Rawson 7-7283, and Alex Segarra 7-9664.
22 Please see CRS Report RS20839, Mad Cow Disease: Agriculture Issues.
23 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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Foot-and-Mouth Disease24
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
groups allege abuses to have occurred have not substantiated these assertions. Relatedly,
public awareness has risen concerning the treatment of nonambulatory cattle at stockyards.
Farm Bill. The 2002 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
The 2002 farm bill was the major animal agriculture related legislation covered by the
107th Congress. Additional bills that were introduced, but not enacted would have: extended
GIPSA oversight to the poultry industry (H.R. 231, S. 1076); provided for new measures in
dealing with agricultural mergers (H.R. 1526, H.R. 3383, H.R. 3810 S. 1076); prohibited
slaughter of horses for human consumption (H.R. 2622, H.R. 3781); authorized USDA to
restrict importation and transportation of livestock and order the destruction or removal, for
reasons of pest or disease control, or humane treatment (S. 1482); authorized the Secretary
of Agriculture to establish a program to control bovine Johne’s disease (S. 1595); required
24 Please see CRS Report RS20890, Foot and Mouth Disease: A Threat to U.S. Agriculture.
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microbiological performance standards for federally inspected meat and poultry plants, and
an animal identification system that would have facilitated the trace-back of meat and poultry
to the live animal (S. 2532).
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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