STATEMENT OF SENATOR TOM HARKIN (D-IA), CHAIRMAN

HEARING ON PACKER OWNERSHIP OF LIVESTOCK AND USDA

ENFORCEMENT OF THE PACKERS AND STOCKYARDS ACT

"This Committee has previously given a good deal of attention to economic concentration and the competitiveness of livestock markets. We debated the issues and took some action in the new farm bill. Today we will further examine packer ownership of livestock and USDA enforcement of the Packers and Stockyards Act because we still have a long way to go in restoring fairness, openness and confidence in these markets.

"Because of widespread consolidation and vertical integration, packers are in a much stronger position to exert economic power to manipulate livestock and meat supplies and markets. Producers and consumers alike have a critical stake in this trend. The news has been filled lately with reports of how market manipulation and unfair practices have damaged consumers, market participants and our overall economy. That is just as true for livestock and meat markets as it is for energy markets or the stock market.

"Simply put, a ban on packer ownership of livestock would limit the ability of packers to dominate and manipulate markets by locking up supplies. We were able to gain Senate adoption of the packer ownership ban -- albeit narrowly -- in the farm bill. When we got to conference the House stood like a brick wall against our provision. Most of the House conferees argued against the ban, and not one of them spoke in favor of it. The Senate conferees voted to retain the packer ownership prohibition, but the House conferees would not vote on it. And though I asked the Administration several times, it refused to take a position on the issue.

"So clearly, if the ban on packer ownership is ever to be enacted, greater understanding and support for it will be essential. In today's hearing we will hear from farmers, ranchers, and others in the livestock and meat industry. I also hope we will now receive a clear statement of the Administration's position on the issue. Obviously, this is still a controversial topic, but for those who oppose the ban and predict negative consequences if it is adopted, I simply point to our record in Iowa. Iowa law has prohibited packers from owning livestock for over twenty years, and we are still the number one producer of hogs in the nation, with a strong independent hog farming sector and more hog packing plants than any other state.

"While the proposed ban on packer ownership of livestock would address a specific aspect of the problem, the Packers and Stockyards Act, enacted in 1921, applies much more broadly to prohibit anti-competitive practices and market manipulation in general. Agricultural law experts, the General Accounting Office and the federal courts have all agreed that the Packers and Stockyards Act is broader than previous trade practice and antitrust legislation, such as the Sherman Act and the Federal Trade Commission Act. As the GAO noted, the Packers and Stockyards Act was written broadly to protect the public interest and participants in the industry from producers to consumers."

"Given the structural changes in the livestock and meat industry, effective enforcement of the Packers and Stockyards Act is more crucial now than any time in history. Yet despite its broad grant of authority, USDA has not brought even one complaint arising from a competition investigation since the beginning of fiscal 2001. The last case of significance in the hog industry was the Excel case, which was filed April 21, 1999 -- well over three years ago. Not one complaint -- in the face of accelerating consolidation and vertical integration in the hog industry, unprecedented spreads between live cattle and retail beef prices, and widespread complaints about unfair practices in the poultry industry.

"USDA's weak enforcement of the Packers and Stockyards Act has been challenged for many years by farmers, ranchers, the USDA Inspector General, the Commission on Small Farms and the GAO. The latest report by the GAO, released in September of 2000, concluded that USDA's investigative and enforcement efforts were seriously lacking and included a series of recommendations to improve enforcement. In November of 2000, Congress included a provision in the Grain Standards Improvement Act requiring USDA to implement these recommendations and provide Congress a report of the improvements in one year. In my role as a member of the agriculture appropriations subcommittee, I made sure that USDA had the funds to implement the GAO recommendations.

"USDA has at least made attempts to comply with most of the recommendations made by GAO. It has implemented training programs for economists and attorneys and completed a report on the status of the livestock industries. Nevertheless, the fact remains that USDA has not brought any new competition cases under the Packers and Stockyards Act and it has failed to issue regulations that would clarify the Act and make it easier for the agency and private parties to enforce. For example, over two and a half years have passed since Congress required USDA to establish a swine contract library, to help inform farmers who contract with packers, but USDA has still not issued the regulations for the contract library.

"Frankly, the present situation cannot continue. Frustration over lax enforcement of the Packers and Stockyards Act has been building for some time and it is now boiling over. Far too many independent livestock producers have been forced out of business, and many more can see the handwriting on the wall. They have no future in the industry unless fair, open and competitive markets are restored.

"Again, the GAO concluded that USDA has the necessary authority to take action, but that it needed to get its act together. Congress has poked and prodded, but the response has been minimal. Agricultural producers are desperate for action because the clock is running out on them. If USDA believes it needs further legislation, we need to receive recommendations. To spur discussion, I had proposed during farm bill consideration a reorganization of USDA to create a new special counsel for competition and other measures to improve enforcement.

"I look forward to hearing today's testimony and to working with agricultural producers, with my colleagues and USDA to address these critically important issues in the livestock industry."

-30-