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PUBLIC HEARING SUMMARY

LIVESTOCK PRODUCTION STUDY COMMITTEE

December 15, 1995
Second of Three Public Hearings

MEMBERS PRESENT

PUBLIC HEARING IN BRIEF

Minutes prepared by Doug Adkisson, Legal Counsel,
Organizational staffing by Doug Adkisson, Legal Counsel

  1. 1. Procedural Business.
  2. 2. Persons in Attendance.
  3. 3. Public Comments and Discussion.

SUBCOMMITTEE BUSINESS

1. Procedural Business.
a. The Livestock Production Study Committee agreed to form subcommittees to conduct public hearings around the state. Senator Randal J. Giannetto and Representative Sandra H. Greiner chaired the public hearing held on December 15, 1995, which was called to order at 2:15 p.m. in the Meeting Room of Brenton Bank, 833 4th Avenue, Grinnell, Iowa. The public hearing was adjourned at 3:50 p.m.
b. Senator Giannetto read the charge of the Committee and invited persons to present testimony. The charge provides that the Committee is to consider the increasing degree of vertical integration of the livestock market by packers and processors, including threats to economic competition, independent production, and consumer protection; and market practices engaged in by packers, processors, or buyers which increasingly threaten open and fair markets by establishing arbitrary and inconsistent pricing without public disclosure or price discovery mechanisms, including price differences based on the time of delivery, and transaction.
2. Persons in Attendance.
Persons attending the public hearing included Representative Beverly J. Nelson; Representative Danny C. Carroll; Mr. Dean McWilliams, Iowa Cattlemen's Association; Mr. Russell Lyon; Mr. Craig Lang, Iowa Farm Bureau Federation; Mr. Aaron Heley Lehman, Iowa Farmers Union; Mr. Roger Edgington; Mr. Gene Kubic; Mr. Kelly Biensen; Mr. Jerry Sullivan; and Mr. Ed Peak.
3. Public Comments and Discussion.
The subcommittee heard testimony and engaged in discussion with persons attending the public hearing regarding a number of issues, including vertical integration, marketing practices, the importance of the livestock industry to the state, livestock production, and legal restrictions affecting the livestock industry. The following written and oral comments were presented:
a. The United States Department of Agriculture will no longer provide monthly reports regarding feedlots having a capacity of less than 1,000 cattle.
b. The new grading system for beef adopted by the United States Department of Agriculture should improve Iowa's position in the market.
c. It is important to increase the number of cattle in the state and to encourage the location of modern packing facilities in the state.
d. Total integration within the livestock industry is primarily isolated to niche markets which typically benefit producers. Iowa could benefit more in niche marketing of high quality beef products.
e. Forward pricing contracts, formula pricing, hedges, and contract feeding are necessary for many producers to remain competitive.
f. The Iowa Cattlemen's Association is concerned about price discovery mechanisms.
g. The Iowa Cattlemen's Association supports federal congressional investigations regarding collusion and monopolistic practices by packers.
h. Most Iowa-raised cattle are processed out of state.
i. The state should support the introduction of smaller packing facilities using advanced technology.
j. The enactment of 1995 Iowa Acts, chapter 195 (House File 519), regulating animal feeding operations represents a compromise which negatively affects Iowa cattle feedlots. Future action should be limited to addressing concerns regarding the care and feeding of swine.
k. Cattle production will expand in those moderately sized operations which are profitable.
l. The Iowa Cattlemen's Association and Iowa State University have discussed a strategy to improve the cattle industry in the state referred to as "Blueprint for Beef" which may include cooperative feedlots, improved feeder cattle marketing programs, Iowa labeled products, expanded niche marketing, improved producer understanding of recordkeeping, and new packer and processor facilities utilizing advanced technology.
m. If 1995 Iowa Acts, chapter 195 (House File 519), regulating animal feeding operations, is reconsidered in the 1996 legislative session, the General Assembly should exclude cattle feeding operations from many of the law's provisions.
n. Land that is currently subject to contract with the United States Department of Agriculture under the federal conservation reserve program should not return to crop production. The state should act to encourage such land be retained as pastureland.
o. All producers are affected by market access. Small producers can compete against large operations, if small producers are provided with the same opportunities to sell livestock.
p. A few firms, including Monfort, Excel, IBP, and ConAgra, control the market.
q. Packers should be required to report all prices paid for livestock, including prices paid under contracts.
r. A recent Attorney General's opinion referred to as the "Smithfield" case demonstrates that Iowa law does not adequately prevent an out-of-state processor from controlling the production of swine in this state. Smithfield, is one of only two pork processors left in North Carolina. The company now obtains over half of its slaughter hogs from corporate farms. Smithfield owns one corporate farm (Brown) and the representatives of three other corporate farms (Prestige, Murphy Farms, and Carroll Foods) are represented on Smithfield's board of directors.
s. Vertical integration threatens Iowa's independent producers just as it threatened and destroyed independent producers in North Carolina.
t. Livestock producers should be encouraged to enter into cooperative relationships. Cooperative associations should not compete without the participation of farmer members.
u. Packers prefer to purchase quality animals rather than a quantity of animals.
v. There is a need for moderation when considering solutions to issues considered by the Committee. Iowa law should be strengthened to prevent packers from controlling the production of livestock. The federal government must begin to report contract prices. The state should enact legislation that prohibits price discrimination.
w. Iowa must act in conjunction with other states.
x. Packers engage in a number of unfair practices, including refusing to purchase from producers whose stock do not have required genetic characteristics, failing to report high bids to market reporting services, and controlling local areas or regions by contracts or livestock ownership in order to prevent competition.
y. The state should gather information regarding market access. The federal government should investigate and enforce antitrust provisions.
z. Responsible pork production must involve good neighbors who take care of their farms, protect the environment, and contribute to the life of their communities. A healthy rural Iowa depends upon owner-operated family farms having access to fair, open, and competitive markets.
aa. Independent producers can compete against corporate operations if they have equal access to markets.
bb. The Farm Bureau Federation supports legislation in Congress to investigate market access in the meat packing industry.
cc. The United States Department of Agriculture and the Department of Justice should aggressively monitor and enforce antitrust laws pertaining to packer mergers, market concentration, and packer feeding.
dd. Packers should be required to report all cash and contract prices and the terms of sale to the federal Market News Service of the United States Department of Agriculture.
ee. Packers should be required to report all forward-contracting five market days in advance rather than the current two-week threshold.
ff. Packers should be prohibited from forward-contracting their entire slaughter capacity.

OTHER INFORMATION FOR THIS COMMITTEE:

| Charge | Members | Staff | Final Report |

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