Grassley on Transparency in the Cattle Industry
May 13, 2020
Prepared Floor Remarks by U.S. Senator Chuck Grassley of Iowa
On Transparency in the Cattle Industry
Tuesday, May 12, 2020
Iowa is home to 88,000 family farms.
These farms make up the economic foundation of our rural communities and farmers are the leaders that make up the city councils and school boards across our state.
So when we see economists estimate a 20 percent cut in livestock and grain producers’ revenue due to COVID-19 market impacts, it isn’t just our farmers who are concerned – it’s our whole state.
In the CARES Act, we provided USDA with $24.5 Billion to address this loss in revenue.
However, we know that even with this funding, the supply chain disruptions from COVID-19 will force some agricultural producers to miss payments – and ultimately some will be forced to sell their family farms.
The consequences of COVID-19 shutdowns have injected uncertainty that we haven’t seen since the Farm Crisis of the 1980’s.
During my time in the Senate, I’ve always been a vocal advocate for the importance of a safe, affordable and secure supply of food.
But now, our country’s food supply chain is facing disruptions never envisioned.
As processing plants have shut down due to employees being sick, the supply chain disruptions are being felt by farmers and consumers.
With as much as 40 percent of slaughter capacity down for the past month, beef prices have doubled.
This has caused meat shortages in fast food chains, and grocery stores across the country have been forced to limit meat purchases per consumer.
If that’s not bad enough, livestock producers have been turned away by meat processors with livestock that is ready to sell.
Even if producers are lucky enough to sell, the prices they’re getting are well below the cost of production and they are losing money on every animal they sell.
I’ve received a large volume of calls and emails from Iowans and member organizations expressing concerns that the current discrepancy between high shelf price and decreased cattle price does not make sense.
I share the concerns of these farmers and I take their claims of market manipulation seriously.
This past week, President Trump echoed a request I made of the Attorney General last month to examine the current structure of the beef meatpacking industry and investigate potential market and price manipulation.
Holding the four large meatpacking companies accountable is the least we can ask of federal officials.
The fact is, over 80 percent of feedlot cattle in the U.S. are slaughtered by four large meatpacking companies: Tyson Foods, JBS, Cargill and National Beef.
Because these companies control a large percent of slaughter and processing capacity in the U.S., they have the unique ability to influence the price of live cattle.
They use tactics such as bottlenecking processing speeds, importing foreign meat, utilizing private forward-formula contracts and piling up meat in cold storage to delay the need to purchase live cattle.
I’m glad the President asked the Department of Justice to look into these schemes to see if any of the behavior is illegal.
Independent producers will always struggle when negotiating prices when there are only four large multi-national corporations that control prices.
However, in Iowa, our producers sell 50 percent of cattle through negotiated cash trade.
This allows for market transparency so that producers know the market price of cattle, and the price more accurately reflects the costs that producers incur when raising livestock.
However, this isn’t the case across the country as more than 80 percent of all cattle are sold through formula contracts and/or the cattle futures market.
These private contracts don’t allow for price transparency and hide the true value of production from the rest of the marketplace.
This is not a new problem.
In fact, 18 years ago I introduced a bill with former Senator Feingold from Wisconsin that would’ve help producers gain leverage by mandating that percentage of a packer’s weekly slaughter come from a negotiated cash price.
I introduced that bill every Congress until 2009, but sadly, not enough of my colleagues saw the need for a transparent marketplace.
Today, conversations across the country have started to shift.
Lawmakers have begun to realize that in order to have a sustainable supply of meat in our country, we need to restore transparency in the marketplace and protect the market from collapsing when there are supply chain disruptions.
Today, I’m resubmitting my bill to foster efficient markets and increase competition and transparency among packers that purchase livestock from producers.
The only change is to increase the amount of mandated negotiated cash trade to 50 percent from the original 25 percent.
This change is needed to increase price discovery for producers across the country.
I’m proud to lead this effort with Senator Tester and will work with my colleagues in the Senate, and particularly those on the Senate Agriculture Committee, to make sure that this bill becomes law.
Without significant action by Congress, our independent beef producers will not be able to stay in business.
I believe the time to act is now. Failure to act is failing our independent producers.
If there is one silver lining that could come out of COVID-19, it may be that consumers will start to understand where their food comes from.
Food does not come from the grocery store. It comes from tens of thousands of farmers and independent producers who bust their backs day and night to ensure families across the country have an abundant supply of food.
Farmers are 2 percent of the population who provide for the other 98 percent.
I urge my colleagues to support my legislation and do right by the producers who provide the food we all eat.