A dedicated cattle and beef chapter in the new farm bill would represent “an important opportunity to reform U.S. agriculture policy to level the playing field for cattle producers,” an industry spokesman says.
“This should guarantee a competitive domestic market for cattle and beef, strengthen safeguards for health and safety, improve consumer information, address global distortions in cattle and beef markets, and establish new and expanded programs to support the continued vitality of the largest sector of U.S. agriculture,” Leo McDonnell told a Senate Committee on Agriculture, Nutrition and Forestry regional farm bill hearing.
Speaking on behalf of the Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America (R-CALF USA), McDonnell, a cow-calf producer, feedlot owner, and seed stock producer, pointed out that, historically, cattle producers have not asked for price assistance from the government.
“We’d like to keep it that way, but in today’s business climate, independent cattle producers are facing significant obstacles. Barriers to our exports and mismatched import standards have created a large U.S. trade deficit in cattle and beef.
“Meanwhile, here at home, cattle producers must negotiate in a market that is terribly distorted at times, with increasing concentration and poor marketing practices. We’re unable to differentiate our product, even though we’re in an increasingly global market. This hardly makes sense.”
Since 1994, McDonnell noted, more than 120,000 cattle ranches and farms have closed or otherwise exited the business and the cattle/calves inventory has dropped from 101 million to just under 95 million.
McDonnell urged the panel to make certain the 2007 farm bill gives cattle producers an opportunity to address some of these problems.
“The legislation should offer a competition chapter that addresses price-distorting practices such as captive supplies, non-price negotiated forward contracts, exclusive marketing and purchasing agreements, and perhaps packer ownership.
“Concentration should be revisited, and transparent market information should be a priority. Capitalism comes in many forms; a free and competitive enterprise is a founding value of this country and has made us the greatest country in the world. Let’s not lose it.”
McDonnell also noted that captive supply practices push risks of price instability onto producers and hold down cattle prices. “As prices for cattle are artificially depressed and become more volatile, producers pay the price, even when broader demand and supply trends should be increasing returns to producers.”
Congress should address the impact of current U.S. trade policy, he says, and because the USDA is currently involved in trade negotiations, “the agency needs clearer policy from the industry.”
U.S. cattle and beef industries had a trade deficit last year of more than $3 billion, McDonnell pointed out.
“Our competitiveness is undermined by large subsidies and high tariffs on cattle and beef in other countries, while the U.S. market is one of the most open in the world and our cattle producers receive no trade-distorting subsidies.”
It will also be important, he says, that the USDA “become more engaged” in researching how exchange rates play into agricultural trade flows and in monitoring the manipulation of exchange rates.
The United States has special rules for perishable and cyclical agriculture products, passed through Trade Promotion Authority and signed into law, “yet the USDA held back on getting that information submitted in the Doha round of trade negotiations,” McDonnell says. “When the USDA did submit the information, cattle and beef were left out.”
The global beef market, he says, is “the most distorted market,” and suggests that Congress look at the possibility of tax write-offs, capital gains breaks, or estate tax relief until those distortions are addressed.
While the United States “has struggled to negotiate even limited access for U.S. cattle and beef exports to foreign markets,” McDonnell says, “the domestic market has been thrown open to a much broader range of imports. The farm bill should direct the USDA to engage with other countries to upwardly harmonize global import standards for beef.”
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