Livestock Marketing Rule Over $100 Million Threshold

US - USDA Chief Economist Joe Glauber was peppered with questions and frustrated comments from the members of the Senate Agriculture Committee during a hearing on the state of the US livestock industry.
calendar icon 30 June 2011
clock icon 3 minute read

While many issues, including ethanol, trade and animal welfare were discussed, the livestock marketing rule proposed by USDA’s Grain Inspection Packers and Stockyards Administration (GIPSA) took centre stage with Glauber declaring that the rule appears to cost more than $100 million – a threshold that should have triggered an economic impact analysis before the massive proposed rule was published in June 2010.

In opening remarks, Sen. Pat Roberts set the tone for the hearing, saying: “To be perfectly blunt, this rule as proposed looked like a trial lawyers Full Employment Act. Better yet I'll read a quote from Administrator Mr. [Dudley] Butler regarding the core of the material in the rule. His quote, ‘That's a lawyers dream- a plaintiff lawyers dream.’ He was a plaintiff's lawyer.”

Roberts continued: “I understand that part of government service is that folks with diverse backgrounds and experience will fill the political positions and that is usually a good thing. We need people with real world experience helping to run our government.

"The problem is when those serving seem to have trouble checking their past agendas at the door. In this instance since we're talking about livestock it seems like the fox is guarding the henhouse and we're missing a few hens.”

In prepared testimony submitted by USDA, the Department acknowledged the economic analysis now being done at the urging of Congress. USDA said that a team headed by Glauber “is studying the rule and preparing the necessary cost benefit analysis.

His analysis will reflect the comments and especially the cost-related comments that were received by the agency. We have no preset timeline for completing this rulemaking. Our focus is on getting the rule done right and making sure that outstanding issues or concerns are addressed properly.”

Roberts probed Glauber about whether the analysis will consider the potential chilling effect it could have on marketing agreements between livestock producers and meat processors that have contributed to the success of the meat and livestock sector. Glauber said that the potential impact is a “very big issue that figured into lots of the comments received.”

When Glauber declined to answer a question from former Agriculture Secretary now Sen. Mike Johanns (R-NE) about whether USDA went beyond its Congressional mandate in the proposed GIPSA livestock marketing rule, Johanns told him, “I can see your discomfort and I think I understand it. USDA has gone beyond its authority here.”

In a dramatic and emotional follow-up comment, Roberts said, “I tell you the face of this statute is an ugly statute. That makes me hot. We got enough lawyers down there to explain to me, explain to staff, why GIPSA rules are not consistent with Congressional intent. …We are told that we don’t matter.”

US Premium Beef CEO Steve Hunt said that the valued based pricing his company uses is necessary to attract cattle for some of their key programs like branded, natural and age verified.

“Our records show that producers of all sizes have benefited from USPB’s value-based system. However, our smallest producers typically have earned the largest premiums per head,” Hunt said.

“Through fiscal year 2010, USPB has purchased more than 8.3 million head of cattle since beginning operations. Eighty-three percent of USPB deliverers ship less than 500 head per year. In analyzing the top 25 percent of all the lots of USPB cattle delivered since we began operations, the group of producers with the highest average premium delivered less than 250 head per year, earning a premium of $63.48 per head.”

“The second highest premium group consists of producers who delivered less than 100 head per year, with a premium of $62.92 per head,” he added.

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