"Allowing independent livestock producers to receive a fair price should be everyone's goal. Producers need a consistent spot market for information and access," Grassley said.
Grassley's legislation would require 25 percent of a packer's daily kill to come as a result of purchases made on the daily, open market or spot market. By requiring a 25 percent spot market purchase, the Mandatory Livestock Reporting system would be able to provide consistent, reliable numbers about what is being purchased from the spot market and, thereby, improve the accuracy and transparency of daily prices. In addition, independent producers would be assured a competitive position due to the packers need to fill the daily 25 percent spot market requirement.
"This legislation would improve price transparency and bring more accurate Mandatory Price Reporting data so independent producers can have a fair marketplace to sell their livestock," Grassley said. "We must increase competition between livestock processors, develop consistency in the Mandatory Price Reporting program, and assist processors with determining prices for certain livestock market contracts."
The Transparency Act would complement Grassley's proposal to ban packer ownership of livestock. The packer ownership ban was taken out of the 2002 Farm Bill during conference negotiations despite twice passing the Senate.
Grassley said his new proposal would guarantee that contracts packers make to assure sufficient kill numbers at their plants are based on legitimate information. A packer's contracts typically are related in some fashion to the Mandatory Price Reporting data. Under Grassley's legislation, the contracts could not be manipulated, giving livestock producers a contractual fair shake.Grassley said he will introduce the legislation before the August Congressional recess.
Following is a summary of Grassley's Transparency for Independent Livestock Producers Act:
I. Require packers to purchase a certain percentage of livestock (cattle, sheep, and hogs) on the daily open market, or a cash basis. This is termed "spot market".
II. Spot market purchase means the purchase of livestock by a processor from a seller, if the livestock are slaughtered not more than seven days after the seller and the processor agree on a date of delivery of the livestock and the base price for purchasing the livestock is determined by an oral or written agreement between the seller and processor executed on the day the livestock are delivered for slaughter.
III. Packer spot market purchase requirements shall be fulfilled only by purchases from non-affiliated producers. Non-affiliated producer means a person or entities holding less than 1% of the equity in the packer. A non-affiliated producer also means a person who does not hold an executive position, does not sit on the board of directors or does not owe the packer a fiduciary duty.
IV. Shall apply only to packers large enough to be required to report daily live animal prices to USDA through the mandatory price reporting act.
V. Schedule of daily spot market purchases:
5% by January 1, 2004
15% by January 1, 2006
25% by January 1, 2008
This schedule shall be reduced for the closed cooperatives by 50% for the January 2006 and 2008 dates respectively. Closed cooperatives shall also purchase the daily spot market livestock from non-shareholders and non-affiliated producers of the cooperative.
VI. After the effective date of the legislation, packers purchasing at least 25% of the livestock on a daily spot market basis shall not take action to reduce the daily spot purchases percentage below 25%. After the effective date of the legislation, closed cooperative packers purchasing at least 12.5% of the livestock on a daily spot market basis shall not take action to reduce the daily spot purchases percentage below 12.5%
VII. This legislation shall exempt single plant entities with no affiliation to larger packing entities.
VIII. This legislation does not pre-empt state law regarding packer feeding of livestock, state law may be more restrictive.
