So you are a pork producer or a cowboy, and just have a passing interest in the 2007 Farm Bill. Maybe you raise poultry, or sheep, or exotic livestock and they are never mentioned in farm programs. Since there are no program payments for livestock production (except milk), you have very little interest in the current debate on Capitol Hill. Buckle your seatbelt for a 180 degree turn.

As all 435 Members of the House and 100 Members of the Senate prepare for farm policy debate over the next several months, the Congressional Research Service has been issuing background papers so everyone on Capitol Hill can speak about agriculture without having the audience or the media giggle. The recently released report on animal agriculture contains a broad look at some controversial issues that need to be addressed in the 2007 Farm Bill. Here is a slice of the report now in the hands of your Congressman and Senators:

Livestock and their products are not covered by farm program payments, and producers have not sought coverage, except for disaster assistance when pastures were unavailable. Livestock can be covered by livestock insurance limited to cattle and hogs, and whole farm revenue pilot programs in some states. The options are not as comprehensive as typical crop insurance. However, the value of animal agriculture exceeds $105 billion, which is over half of the total value of farm production. Animal agriculture is changing with the growing integration of production, marketing, and processing. These trends are occurring at the same time feed costs are rising due to ethanol demand for corn and while there are public policy concerns about environmental protection, food safety and animal welfare.

The US is a world leader in trade of livestock and meat products. The US is the #1 producer, consumer, and importer of beef, and dropped from #2 to #8 rank in exporting after the BSE case. For pork, the US is #3 producer, consumer, and importer; #2 exporter. For broiler meat, the US is #1 producer and consumer; #2 exporter. We are the #1 producer, consumer, and exporter of turkey. A substantial challenge is for importing countries to impose phytosanitary regulations to impede trade, which have no scientific basis.

Feed is the largest cost for livestock production and that can be impacted by land retirement programs such as the Conservation Reserve, as well as government promotion of ethanol which competes with livestock for corn. While ethanol plants produce distillers’ dried grains as a livestock feed, it cannot replace corn on an equal basis and is less useful to pork and poultry producers because of the lower energy and higher fiber content.

The Congressional Research Service (CRS) report quotes a study by Tufts University, which contends in the 9 years after the 1996 Farm Bill, corn prices were 26% under true production costs and soybeans were 15% under true production costs. The report contends that livestock producers have long benefited from low costs of feed. While the Agriculture Committee in the House has had minimal debate on the ethanol tax credits and incentives, most of those issues will be decided in other committees.

The CRS analysts tell Congress that structural change is underway, with fewer packing companies and greater connection between the packers and the livestock to be slaughtered. Small cow-calf operations are in the majority of such operations, but large feedlots are in the majority of such operations. Today within the pork industry there are only 10% of the number of operations that existed in 1980; with about 30 key firms, and production is primarily located in Iowa, Southern Minnesota, and North Carolina. For both pork and beef, the number of packing companies has diminished, and the top four firms slaughter 63% of the hogs and 80% of the fat cattle. One of the industry trends is the development of supply chains that bypass typical commodity markets and production suppliers. A recent study of the impact of the trend was that 38% of cattle, 89% of hogs, and 44% of lambs were marketed in this method. While there are several federal laws designed to ensure competition, Congress will be asked to include a competition title in the Farm Bill to further regulate such integrated production and marketing of livestock.

The changing structure of livestock production has clouded the actual price that packers pay for animals, and Congress will be asked to increase the requirements of the Mandatory Price Reporting Law that better indicates current market values. One proposal goes as far as requiring packers to obtain 25% of their daily slaughter from the spot market.

Since the adoption of the 2002 Farm Bill, which was designed to implement Country of Origin Labeling, Congress and USDA and many advocacy groups have grappled with the implementation of the law and how it was going to happen. It has not yet been implemented, and the 2007 Farm Bill is expected to address COOL is some form. COOL advocates say consumers should be aware if their meat products come from foreign countries. COOL opponents say it will give a distinct advantage to American meats, and the US will find itself attacked for violating free trade laws.

Another issue that CRS says Congress will have to resolve is Animal Identification, which also began in the 2002 Farm Bill, with a directive to the USDA to establish a system so that animals with maladies such as BSE could be quickly tracked, and their meat products withdrawn from the market. A universal system is some ways away because of technical issues, as well as cost prohibitions. Issues revolve between mandatory and voluntary programs and CRS says Congress will need to resolve the controversy.

The Animal Welfare Act was designed to set minimum standards for production of warm blooded animals, but animal activists have been advocating an animal rights agenda that prescribes how animals can and cannot be raised, and convincing large food purveyors to force their suppliers to adopt rules not typically accepted in animal production. Congress will be asked to adopt stronger requirements controlling animal production.

The changing structure of agriculture has caused a consolidation of the industry, with the development of larger facilities in areas where there are minimal environmental complaints. However, concerns are lodged about air and water contamination with larger quantities of manure coming from larger numbers of animals. Producers are fighting a requirement to include livestock operations under EPA “Superfund” regulations. The House and Senate Agriculture Committees do not have a vote on the proposal, since it will be heard in other committees.

Summary:
While many livestock producers may think the Farm Bill debate is for grain farmers, there are numerous issues involving the future of the animal agriculture industry. Packer consolidation can negatively impact market prices. The EPA Superfund could be a costly way to remove manure. Animal Identification and Country of Origin Labeling have been on the front burner for the past 5 years with many decisions still to come. Members of Congress are learning the pros and cons of most of the issues, not only from the Congressional Research Service, which is neutral, but from the special interest advocates, which are certainly not neutral.