JULY - AUGUST 1999In This Issue:
Do Market Loss Assistance Payments Distort Trade? by Randy Green
Sanctions Reform Passess Senate by Randy Green
The Time Has Come for Mandatory Livestock Price Reporting? by Richard Pasco
DO MARKET LOSS ASSISTANCE
PAYMENTS DISTORT TRADE?
A Tough Decision for USDA
Even as Congress debates whether to extend and expand last year's Market Loss Assistance payments to boost farm income, a more obscure debate about the same payments could affect the course of international trade negotiations.
This debate - about whether the United States. should formally notify the World Trade Organization (WTO) that these payments are trade-distorting, or instead put them in a category of payments that do not distort trade - burst into the open during a recent Congressional hearing. U.S. Department of Agriculture officials were criticized for a reported initial decision to consider the payments trade-distorting, thereby including them under broad international limits on what the United States can spend on certain types of farm support. No final decision has been made, though, and top Department officials are considering the matter.
How the Market Loss Assistance (MLA) payments are classified is not simply a matter of accounting. If they are included within this country's Aggregate Measure of Support (AMS) - the category of payments which WTO member nations agreed to limit and reduce during the last worldwide trade negotiations - it is conceivable that the U.S. could be out of compliance with its trade obligations in the near future. Another concern is how other countries would react to a U.S. decision not to include the payments within the AMS, especially since domestic supports may again be a hot topic in the new round of WTO talks that will begin this fall.
Commitments under the Uruguay Round
The Uruguay Round Agreement on Agriculture (URAA) featured an unprecedented commitment by WTO member nations to discipline some domestic policies as well as trade policies. The domestic policies to be disciplined were those that negotiators believed to have a trade-distorting effect. Other domestic policies were exempt from discipline.
WTO member countries are required to limit and gradually reduce the total amount of trade-distorting domestic policies - an amount called the Aggregate Measure of Support. Measuring from a base period, each country has a maximum allowable AMS for each year of the URAA implementation period. For example, the U.S. AMS is currently about $19 billion. Generally, the United States has not been compelled to cut AMS components by the terms of URAA, because it had already done so for other reasons.
Countries are to notify the WTO of their spending on various categories of domestic agricultural support - not only those in the AMS, but also payments included in the so-called green box, such as payments under the 1996 Freedom to Farm law. Green box payments are considered not to distort trade because they are decoupled. This means, in the words of the URAA text, that these payments are not "related to, or based on, the type or volume of production ... undertaken by the producers in any year after the base period" and that they are not "related to, or based on ... prices ... [or] ... factors of production employed in any year after the base period." Finally, "no production shall be required in order to receive such payments." (Paragraph 6, Annex 2 of the URAA; emphasis added.)
MLA Payments
MLA payments were mandated in the omnibus appropriation bill for FY 1999, and may be renewed and expanded in the Agriculture Department appropriation bill for FY 2000. Congress provided a sum of money and directed USDA to make the payments according to the same formulas used to make transition payments under the Freedom to Farm law.
For 1999, the MLA payments were about 50% of the 1999 transition payment. The Senate-passed version of the 2000 agriculture appropriation bill (H.R. 1906) would make another round of MLA payments, providing enough money so that the payments would equal about 100% of the 2000 transition payments.
Green Box or Not?
The Freedom to Farm transition payments are considered to be fully decoupled, and the U.S. has classified them in the green box. No country has challenged this classification. Since the MLA payments are directly proportional to transition payments, it seems logical that they would also go in the green box.
MLA payments certainly are not tied to current production. A farmer with a Freedom to Farm contract may receive a transition payment on corn whether or not he grows corn this year. His entitlement to the corn transition payment depends on whether he grew corn during the years before Freedom to Farm was enacted, not on whether he grows it now. If he is entitled to a transition payment, he will also be entitled to an MLA payment. His actual production will in no way affect his eligibility.
Transition payments are also unrelated to current prices. The amount of the transition payment is determined by a formula that was set at the time Freedom to Farm was enacted. The amount does not vary with price levels. Since MLA payments are proportional to transition payments, it can be argued that they are also unrelated to current prices.
A Connection to Price ...
USDA analysts have noted, however, that it is possible to argue the contrary case. They point out that MLA payments are a direct Congressional response to concerns by farmers and the public about low farm prices. If prices had been significantly higher in 1998, the MLA payments would likely not have been legislated. Similarly, if prices had not fallen further in 1999, Congress probably would not be debating another round of MLA payments this year.
Under this analysis, MLA payments are simply ad hoc deficiency payments. They are a countercyclical income assistance program that responds directly to low farm prices, just as deficiency payments did. The critical element in the analysis is not whether the payments are calculated according to a formula, but whether they are related to prices. MLA payments, in this view, obviously are related to prices.
However, USDA acknowledges that the question is not an easy one to resolve. Contrary arguments can be made.
... Or Maybe No Connection at All
First, it is worth recalling that Republican Senators who first proposed what became the MLA payments did not call them "market loss assistance" but "lost market payments" or a similar term. The concept was not so much to compensate farmers for losses in the market as for losses of markets. (See "What the Law Says" below.) Familiar Republican themes at this time were that the Clinton Administration was not utilizing export programs with sufficient vigor, that neither Congress nor the Administration had delivered the fast-track negotiating authority that might lead to new market opportunities, and that unilateral economic sanctions were preventing U.S. farmers from selling their products into some significant markets.
From the perspective of these Senators, the new assistance was justified, not because of some weakness in the Freedom to Farm law, but because neither Congress nor the Administration had kept what they viewed as promises to farmers. These were promises - not statutory commitments - having to do with trade policy, taxation, regulatory burdens and other matters, and had been critical adjuncts to Freedom to Farm in some legislators' eyes.
Courts sometimes do not give legislative history much deference, and perhaps neither would the WTO. In this case, however, as USDA mulls what it acknowledges is a question that could go either way, the original intent of Congress could help inform its decision.
The Plain Language of the Law
Another, less subjective argument against considering MLA payments tied to price is simply that the statutory language does not do so. USDA is required to make payments, instructed to do so in proportion to an existing system of transition payments that is unrelated to price, and is nowhere instructed to vary the payments depending on actual market price levels, or to take prices into account in making the payments.
By contrast, the deficiency payments of former farm bills were always expressed - in statute - as the difference between one per-bushel price (the target price) and the higher of two other per-bushel prices (the season average price or the loan rate). In issuing the deficiency payments, USDA relied on a system of weighted monthly average farm prices over a certain number of months during the marketing year. The calculations were a matter of public record, as were the relative weights given to each month's price.
There is nothing like this for MLA payments. To judge that they are "related to, or based on" prices, one must go beyond the statutory language that required them to be made, and the procedures under which USDA carried them out, and somehow divine the presumed intent of Congress. The statutory language is not so ambiguous that USDA must read Congressional minds in order to carry it out. Therefore, just as it relied on the plain language of the statute to make MLA payments, USDA can rely upon it in notifying the WTO. Moreover, as pointed out above, if USDA did decide to look at Congressional intent, an argument can be made that some members of the majority party did not represent MLA payments as directly tied to prices.
What the Law Says
The statutory language can be used to argue for both points of view. In addition to requiring that payments be proportional to Freedom to Farm transition payments and specifying the total dollar amount of assistance, the 1998 legislation said that the purpose of the payments was "to partially compensate the owners and producers for the loss of markets for the 1998 crop of a commodity."
If you believe the MLA payments belong in the green box, you can cite the consistency of this language with Republican Senators' contemporaneous rhetoric. Clearly, Congress was making payments to compensate for the loss of entire markets, not price declines spread across all markets. A focus on specific, discrete markets is more consistent with the broken-promise theme (not enough use of export programs, no fast track or sanctions reform) than with the theme of low prices.
If you believe the MLA payments should be counted toward the AMS, on the other hand, you can argue that the ambiguity of the phrase "loss of markets" begs for an analysis of the larger context, in which case it is clear that Congress was responding to low prices whether legislators actually said so or not. No one, you would continue, can claim that Congress would have spent over $3 billion on cash transfer payments merely because they had not yet gotten around to lifting the Cuban trade embargo or because the Administration had not operated the Export Enhancement Program.
How Decoupled Can a Payment Be?
Finally, USDA may wish to consider that any decoupled payment presumes some public-policy response to prices that are lower than desired. Generally, governments provide income support to agriculture upon some determination (even an implicit one) that marketplace returns are insufficient to maintain the sector's income at a desired level. But marketplace returns are normally a function of market prices for commodities. So all farm income support responds to some concern about farm prices. Yet unless there is a much more direct tie to price levels than is apparent in the statutory requirements for MLA payments, the United States need not consider them part of the AMS.
Mulling the Precedent
USDA officials might accept this analysis and still have some legitimate qualms about putting MLA payments into the green box, since that would set a precedent other countries could follow. Green box expenditures have been increasing rapidly since the URAA was signed anyway, as countries have shifted significant amounts of support into this category. On one level, this should be encouraging, but at another level it raises the question of possible abuse. What if other countries designed ambiguous, border-line policies that really should be counted under the AMS, but classified them as green-box policies because they could get away with doing so - in part because the United States did so first? In addition, would the United States be giving some of its trading partners - notably the Cairns Group of self-described non-subsidizing exporters - a reason to accuse this country of hypocrisy?
Under the URAA, the U.S. allowable AMS is now about $19 billion. Since Freedom to Farm payments do not count toward this amount, U.S. officials generally have not been concerned about breaching it. In the last few years, the primary U.S. policies counted toward the AMS have been the benefits from the sugar, peanut and dairy programs. These benefits have generally totaled about $5-$6 billion a year, according to USDA.
For 1998 and 1999, the United States will also have to count loan deficiency payment (LDP) and marketing loan gain outlays toward its AMS, since they are tied to both current production and current prices. If LDPs and marketing loan gains approach $8 billion during 1999, and if the Senate-passed MLA payments were to be approved or even increased, then the U.S. might be uncomfortably close to violating its WTO commitments for the total AMS - if, and only if, MLA payments counted toward the AMS.
Avoiding the Problem
In fact, there are two reasons why they may not. We have already discussed one possibility: The United States could plausibly argue that MLA payments are not tied to production or prices. The second reason is that, under the URAA, countries need not count de minimis subsidies toward the AMS, even if they are tied to production or price. The standard for a de minimis subsidy is 5% of the value of production for the commodity in question.
It is less clear how to calculate a de minimis amount for subsidies that, like the MLA payments, are not product-specific. USDA analysts believe that in such cases, the proper denominator (i.e., the answer to the question, "Five percent of what?") is the total value of all agricultural production in the country, and past U.S. practice in notifying the WTO of its subsidies follows this convention. Under this precedent, the value of the MLA payments would be divided by the value of all U.S. crop and livestock production, and in this calculation they would be considered de minimis payments (because their value is less than 5% of all farm cash receipts). Therefore, they would not count toward the AMS and would not exacerbate any risk of the United States breaching its allowable maximum AMS. They would, however, be considered trade-distorting subsidies, not green box payments.
U.S. Options
To summarize, the current situation is as follows.
How the United States answers this question will probably not be a major issue at the WTO ministerial meeting in Seattle this fall, but the payments themselves may come under scrutiny from U.S. trading partners. The size of the payments has raised some international eyebrows already, and with some countries eager for more disciplines on domestic supports while others are unenthusiastic at best, the new U.S. payments could become a flashpoint for debate.
- The United States has not yet notified the WTO of its 1998 AMS and has not decided whether to include the MLA payments within the AMS when it does.
- The United States might decide to -
- Include the MLA payments on the theory that they were at least somewhat tied to price levels;
- Exclude them on the theory that they were not, in fact, tied to either production or price; or
- Exclude them from the calculation of the AMS on the theory that they fall under the de minimis level, though in this case the U.S. would be admitting that the payments distort trade.
It seems most likely that the United States will ultimately decide not to include MLA payments within its AMS, whether by putting them in the green box or simply considering them a de minimis payment. In that way, the nation will be better able to respond to criticisms of the payments from other countries, and better able to argue their consistency with principles of the URAA. In fact, a good case can be made for this position on its merits. That it is also helpful to arguments which U.S. trade negotiators wish to make may be seen as an added advantage.
When members of the House and Senate appropriations committees meet to resolve their differences on the funding bill for next year's U.S. Department of Agriculture operations, they will debate several issues that involve fundamental national policy, not just spending levels. The most prominent of these issues may be emergency income assistance to farmers, but another provision in the bill could affect the long-term direction of U.S. agriculture as much or more: the sanctions reform amendment offered by Sens. John Ashcroft (R-MO) and Chuck Hagel (R-NE) and co-sponsored by 17 other Senators of both parties.
With the Ashcroft-Hagel amendment, opponents of unilateral economic sanctions have made major progress toward their goals. The amendment's ultimate fate is uncertain, because it does not appear in the House bill and could face vigorous opposition from some members of the House of Representatives. Yet the 70-28 test vote by which the Senate refused to kill the Ashcroft-Hagel measure was cause for rejoicing by agricultural groups, who have argued strenuously that food (and medicine) should be exempted from economic sanctions.
Commercially, the Ashcroft-Hagel amendment is notable for applying to existing economic sanctions. These sanctions are chiefly the embargoes (recently relaxed in some cases) against Cuba, Libya, the Sudan, Syria, North Korea and Iran. For reasons explained later, the amendment would not affect the embargo against Iraq.
Politically, the Ashcroft-Hagel amendment is a signal that the anti-sanctions forces have made progress toward winning their argument, at least when it comes to agricultural products in a year when farm income is depressed. Even were it to be dropped from the appropriations bill in conference, the amendment would be a milestone in the sanctions debate. Its approval by the Senate will shift the correlation of forces to the benefit of sanctions reformers.
Overview
The basic concept behind the Ashcroft-Hagel amendment is made clear in its title: "Requirement of Congressional Approval of Any Unilateral Agricultural or Medical Sanctions." The amendment seeks to establish a process that will prevent future sanctions, and end those that already exist, unless Congress votes in favor of establishing or maintaining the sanctions.
Present and Future Sanctions
The amendment establishes one set of procedures for sanctions imposed after the amendment becomes law, and another set for those sanctions that now exist. With respect to new sanctions, the amendment prohibits the President from imposing a unilateral agricultural or medical sanction, unless he sends Congress a report that describes the sanction and the offending actions it is designed to thwart. The report must be submitted 60 days in advance of the effective date for the proposed sanctions. The sanctions still cannot become effective unless Congress enacts a joint resolution to approve the President's plans.
The procedure is somewhat different for existing sanctions , such as the embargoes in effect against Cuba, Libya and a few other countries. The amendment requires the President to lift these sanctions, but allows prohibitions on Section 416 food donations and export financing (including GSM-102 credit guarantees) to continue. According to sources involved in debate on the amendment, the Congressional Budget Office would have assigned a budget cost to the amendment if Section 416 and GSM-102 had not been specifically excluded. In that event, Senate rules would have required a 60-vote super-majority to prevent the entire amendment from being scuttled.
If the amendment became law, it would be necessary to sort out how its provisions meshed with recent Administration actions that relaxed but did not eliminate restrictions on food sales to Iran, Libya and Sudan. It seems likely that the amendment would require revisions in the new licensing procedures for these nations, since it presumably would override procedures announced by the U.S. Office of Foreign Asset Control.
State Sponsors of Terrorism
The amendment was modified as a result of last-minute negotiations with Senators who opposed the amendment. Under this modification - which applies to both existing and future sanctions - a further restriction applies to exports of agricultural and medical goods to any nation that is identified by the State Department as a state sponsor of terrorism. (As a practical matter, the nations that have been most prominently identified as targets of unilateral sanctions are also on the State Department list. However, the liberalization of sanctions in the Senate amendment may apply to other nations as well.)
The further restriction for state sponsors of terrorism requires that exports can only occur if exporters obtain - to quote the amendment - "one-year licenses issued by the United States Government for contracts entered into during that one year period and completed within a twelve-month period after the signing of the contract." This provision is intended to create a system of annual licenses (as opposed to shipment-by-shipment licenses), with as much as an additional year for actual shipment to occur (i.e., a contract signed on the last day of a one-year license period could call for shipment up to one year after that date).
The restriction also prohibits "federal financing, direct export subsidies, federal credit guarantees or other federal promotion assistance programs" from being used in connection with exports to state sponsors of terrorism. This would preclude GSM-102 export credit guarantees for countries presently subject to sanctions. The meaning of "other federal promotion assistance programs" is unclear but might foreclose the use of the Marketing Assistance Program and similar initiatives. These limitations do not appear to include P.L. 480.
Product Coverage
The amendment applies to agricultural commodities and uses an existing statutory definition for that term. Under this particular definition, it is ambiguous whether or not fertilizer would be considered an agricultural commodity, a question that has often been relevant in past sanctions debates. The amendment also extends its benefits to "medicine or a medical device" but does not precisely define these terms.
Definition of Sanction
The amendment does not affect multilateral sanctions regimes and therefore would not affect restrictions on trade with Iraq, which are carried out pursuant to a United Nations program.
Sanctions affected are those which are (1) unilateral and (2) imposed for reasons of foreign policy or national security (not short supplies). The term "sanctions" connotes not only a full-scale embargo but also the denial of "an agricultural program," a term which is defined to include P.L. 480 food aid, Section 416 food aid, and export credit guarantees or other financing. (Note, however, that a separate provision of the amendment has the effect of allowing sanctions on Section 416 and credit guarantees to continue; see "Present and Future Sanctions" above.)
Congressional Action
A key theme of this amendment is that the burden of action is shifted to sanctions proponents. In order for an existing sanction to continue, the President must first take the initiative to propose its continuation, in the same or a modified form. The President must make this proposal to Congress 60 days before he wishes to implement the sanction. Next, a joint resolution approving the sanctions must be introduced in Congress and pass both the House and the Senate. Otherwise, the existing sanctions will lapse.
The joint resolution would be considered under special rules similar to those under which Congress annually considers China's trade status, and under which Presidents were formerly able to submit trade agreements to Congress for approval. The rules -
Effective Date
- specify the exact wording of the resolution;
- provide for Congressional committees to act on the resolution within a limited time or be discharged from its consideration;
- provide expedited procedures for Senate and House floor consideration of the resolution;
- limit floor debate on the resolution to 10 hours; and
- preclude amendments and otherwise seek to forestall opportunities for delaying tactics.
The amendment is somewhat ambiguous as to when it takes effect. The amendment's final paragraph states flatly that the entire "subsection" - which is the amendment - is effective 180 days after the appropriations bill which it amends is signed into law. However, the amendment also says that for any sanction in effect on the date the bill becomes law, the President must "immediately cease to implement" the sanction.
Conclusion
Six countries that until recently were subject to nearly complete embargoes (Cuba, Iran, Iraq, North Korea, Libya and the Sudan) import $7.1 billion in agricultural products, according to USDA. Sanctions against these countries have likely cost the United States between $446 million and $676 million in annual exports during recent years, the Department found. Although the terms of trade have been relaxed for Iran, Libya and the Sudan in recent months, it remains to be seen how workable the still-restrictive licensing requirements for these nations will be and therefore how much trade the U.S. will regain.
The Ashcroft-Hagel amendment, if enacted into law, would significantly relax existing sanctions, especially for Cuba but also for most other embargoed nations. Opponents of economic sanctions in the business community often point out that U.S. firms would like to sell many goods and services to these nations other than food and medicine. Therefore, private-sector groups and members of Congress who oppose sanctions will continue to pursue broader legislation to reform these unilateral policy instruments. As uncertain as the fate of the Ashcroft-Hagel measure is, it remains a milestone in the rapid evolution of the sanctions debate, and could lead to significant export opportunities for U.S. producers.
Difficult times call for difficult measures, which may help explain the "Livestock Mandatory Reporting Act." If times were good, prices were high and livestock producers were making money, this legislation might not have been pursued by Congress and imposed on the meat packing industry. However, livestock producers have lost large sums of money over the last few years. Therefore, many in Congress think government intervention in the marketplace can assist producers.
Price information is generally thought of as proprietary and confidential. On the other hand, full disclosure of recent sales and price information is deemed necessary to make an informed business decision, whether one is selling a house or a hog. This article outlines the provisions of the bill approved by the Senate Agriculture Committee on July 29, 1999.
Current Law on Livestock Price Reporting
Meat packers and processors currently are not required to report the prices they pay for the animals they purchase from livestock producers, nor are they required to report other terms of sale. Daily livestock sales and price information is collected by USDA's Agricultural Marketing Service (AMS) on a voluntary basis. As greater numbers of animals are being sold under private marketing arrangements, pricing information may have become less transparent because prices are not publicly disclosed.
Implications of Mandatory Price Reporting
This increasingly common situation coupled with low livestock market prices and a highly consolidated meat packing industry have led to new legislation to amend the Agricultural Marketing Act of 1946. The new Livestock Reporting Act would establish, for the first time, a system of mandatory meat packer reporting of prices, quantities, and terms of sale for the procurement of domestic cattle and hogs (and potentially lamb), and products of such livestock.
The implementation of mandatory price reporting is not without some risk to competition. Larger meat packing operations could use price information from smaller plants to offer a lower price, and ultimately force the smaller firms out of business. With limited slaughter capacity and fewer slaughtering locations, such an effect could have serious adverse consequences for smaller livestock producers. Not only could smaller livestock producers face lower market prices, but the closure of local slaughter facilities would raise their cost of getting livestock to market as they are forced to travel farther to market their animals. Perhaps these concerns can be addressed by proper confidentiality measures in regard to information from large and small packers.
Overview of the New Livestock Reporting Mandates
The new statutory price reporting requirements would apply to beef processing plants that have slaughtered an average of 125,000 head and to pork processing plants that have slaughtered 100,000 hogs or more per year in the last five calendar years. USDA would publish three reports daily and a weekly report for each species with information regarding the marketing of cattle, hogs, and the products of such livestock. The specific price reporting provisions for beef, swine and lamb are set forth below.
Mandatory Reporting Requirements for Live Cattle
The corporate offices or the officially designated representatives of cattle processing plants with an average annual slaughter of 125,000 head annually in the last five years must report all purchases of cattle bought live or on a dressed weight basis to the Secretary of Agriculture. Such packers are required to report to USDA twice daily and USDA will publish a morning, afternoon, and a summary of the previous day reports.
To maintain the anonymity of the data source, all information in the reports must be disseminated in an aggregate form. Each price level reported must include a range of estimated live weights, estimated percent USDA Choice or better and any premiums or discounts associated with weight, grade and yield or grid and/or formula purchases. Cattle reports must designate whether such livestock are comprised of fed steers, fed heifers, fed Holsteins and other fed dairy steers and heifers, cows, bulls or other bovine for slaughter.
Daily reporting requires meat packers to report to USDA at least twice daily (once before, and once after, 12:00 noon (Central Standard Time), the following information for each cattle type: the prices for cattle on a per hundredweight basis established on that day and categorized by type of purchase, the quantity of cattle purchased on a live weight basis, the quantity of cattle purchased on a dressed weight basis, a range of the estimated live weights of cattle purchased, an estimate of the percentage of the cattle purchased that were of a quality grade of choice or better, and any premiums or discounts associated with weight, grade, or yield or any grade or any type of purchase. Packers must also report the quantity of cattle delivered to the packer, the quantity of cattle committed to the packer, and the terms of trade regarding the cattle, as applicable.
On a weekly basis, meat packers are required to report to USDA a compilation of information regarding cattle purchased for the "prior slaughter week" (which means the Monday through Saturday prior to the reporting day) for certain types of purchases. Purchase information must be reported for: 1) formula marketing arrangements (where the price is calculated on a grid basis), 2) forward contracts (where the price is quoted from futures exchanges), and 3) packer-owned cattle (where the packer owns the cattle for at least 14 days before slaughter).
For cattle purchased through a formula marketing arrangement and slaughtered during the prior slaughter week, packers are required to supply information on: 1) the quantity of cattle; 2) the weighted average price paid for a carcass; 3) the range of premiums and discounts paid; 4) the weighted average of premiums and discounts paid; 5) the range of prices paid; 6) the aggregate weighted average price paid for a carcass; and 7) the terms of trade regarding the cattle, as applicable. A formula marketing arrangement is defined as "the advance commitment of livestock for slaughter by any means other than through a negotiated purchase or a forward contract, using a method for calculating price in which the price is determined at a future date."
For cattle purchased through a forward contract, packers are required to supply information on the quantity of cattle that were purchased and slaughtered for the prior week. In addition, packers must provide the quantity, basis level, and delivery month for all cattle purchased through forward contracts that were executed. A forward contract is defined as "an agreement for the purchase of cattle, executed in advance of slaughter, under which the base price is established by reference to prices quoted on the Chicago Mercantile Exchange; or other comparable publicly available prices."
For packer-owned cattle, the packer must provide the quantity of cattle slaughtered in the prior slaughter week. Packer-owned cattle are defined as "cattle that a packer owns for at least 14 days immediately before slaughter."
The weekly reporting requirement mandates that meat packers report such information to USDA each Monday, not later than 9:00 a.m. (CST). This same information is to be made available to the public each Monday, not later than 10:00 a.m. (CST).
Mandatory Packer Reporting of Boxed Beef Sales
Packers are required to report to USDA at least twice daily ("not less than once before, and once after, 12:00 noon" (CST) information on total boxed beef sales, as is currently the case for other commodities. The reporting information includes: 1) "the price for each lot of each negotiated box beef sale", quoted in dollars per hundredweight; 2) the quantity at each price level quoted by number of boxes sold; 3) the characteristics of each lot sold, such as the grade of beef, the cut of beef, and the trim specification. The Secretary is mandated to publish such boxed beef reports at least twice daily.
Reporting of Export Certificates for Beef Products
Not later than one year after date of enactment of the act, the Secretary is required to fully implement a program to issue and report export certificates for all beef and beef products, "through the use of a streamlined electronic online system." The legislation envisions the use of national retail scanner data collected by Information Resources, Inc. or other national retail scanner databases to develop retail price reports for boxed beef, based on sales volume and prices. This use of scanner data is designed to create accurate farm-to-retail spread data.
The legislation requires USDA to add beef to its existing commodity export report. USDA also is effectively required to update its export certificate program so that it is automated and online. This automated system will provide producers with timely and accurate information.
Reporting of Beef, Beef Variety Meats & Cattle Imports
The Secretary is required to collect and distribute imported beef information consistent with export reporting. USDA must "obtain information regarding the import of beef and beef variety meats...and cattle using available information sources." These requirements mean that existing U.S. government data on imported beef is to be presented to the public in the same format that the Foreign Agricultural Service reports export beef. The published information must "include information reporting the year-to-date cumulative annual imports of beef, beef variety meats, and cattle for the current and prior marketing years." This information must be published "in a timely manner weekly and in a form that maximizes the utility of the information to beef producers, packers, and other market participants."
USDA also must "determine whether adequate data can be obtained on a regional basis for fed Holsteins, cows, and bulls based on the number of packers required to report." The Secretary is to report on such determination not later than two years after enactment of the legislation.
Swine Reporting Provisions
The legislation provides that USDA will publish by 8:00 a.m. each day, all prices, volumes and terms of sale for domestic swine from the previous business day, grouped by purchase type, and all hogs slaughtered the previous day, by purchase type, from all "federally inspected" swine processing plants and any processing plants that slaughter "an average of at least 100,000 swine per year during the immediately preceding 5 calendar years."
Information on swine must "be published in an aggregated format, and on a national or regional basis, as determined by the Secretary, to protect the identity and confidential information of packers." Thus, swine data is to be published in aggregate form based on geographical regions established by the Secretary.
For packer-owned swine, the reporting information is to "include quantity and carcass characteristics, but not price." Packer-owned swine are defined as swine that a packer owns at least 14 days immediately before slaughter.
For packer-sold swine, information is be reported according to the numbers and percentages of each type of purchase comprising sales of swine by packers and all other sales of swine. Packer-sold swine are owned by a packer for more than 14 calendar days before slaughter and "sold for slaughter to another packer."
The Secretary will review the information required to be reported by packers at least once every two years. If the information that is currently required to be reported no longer accurately reflects the methods by which swine are valued and priced by packers, or if packers that slaughter a significant majority of the swine produced in the United States no longer use backfat or lean percentage factors as indicators of price, the Secretary is to promulgate regulations that specify additional information that must be reported (after public notice and an opportunity for comment).
The daily reporting deadline for plants to report to USDA "information regarding all swine purchased, priced, or slaughtered during the prior business day" is not later than 7:00 a.m. (CST) on each reporting day. The required report from the prior business day must include all purchase data and related information, including: 1) total number of swine purchased, swine scheduled for delivery, and packer-owned swine; 2) base price and purchase data for slaughtered swine for which a price has been established, reported by type of purchase; 3) information concerning the net price, which shall be equal to the total amount paid by a packer to a producer (including all premiums, less all discounts) per hundred pounds of carcass weight of swine delivered at the plant; 4) information concerning the average net price, which shall be equal to the stated per hundred pounds of carcass weight of swine; 5) information concerning the lowest net price ("which shall be equal to the lowest net price paid for a single lot or group of swine slaughtered at a packing plant during the applicable reporting period per hundred pounds of carcass weight"); and 6) information concerning the highest net price. This daily report also must contain "packer purchase commitments"; "all slaughter data for the total number of swine slaughtered, reported by hog class, type of purchase, and packer-owned swine"; and slaughter data regarding "average carcass weight", "the average sort loss", "the average backfat", "the average lean percentage", and "the total slaughter volume".
Such information must be published by USDA not later than 8:00 p.m. (CST). Swine slaughtered by a packer on a weekend day or holiday must be reported on the next business day.
Packers also must report to USDA not later than 10:00 a.m. (CST), on a plant-specific basis, the packer's best estimate of: 1) "the total number of swine, and packer-owned swine, expected to be purchased throughout the business day through all types of purchases"; 2) "the total number of swine, and packer-owned swine, purchased throughout the business day through all types of purchases"; 3) "the base price paid for all base market hogs purchased through negotiated purchases"; and 4) "the base price paid for all base market hogs purchased through types of purchases other than negotiated purchases" (unless such information is unavailable due to pricing that is determined on a delayed basis).
USDA must publish a mid-morning report on this information not later than 11:00 a.m. (CST) and a mid-afternoon report on the same information by 3:00 p.m. (CST) reflecting packer estimates for swine purchases and slaughter for that day. These reports are to include information on volume, base market pricing, cash and spot market purchases, as well as contract sales and packer owned hogs.
A weekly noncarcass merit premium report is to filed by packers with USDA not later than 4:00 p.m. (CST), on the first business day of each week. For each processing plant, the packer must file a report that lists "each category of standard noncarcass merit premiums used by the packer in the previous business week" and the amount paid to producers by the packer, by category. Packers also are required to maintain and make available to producers, on request, a current listing of the dollar values of each noncarcass merit premium used by the packer during the current or previous business week on a plant-specific basis.
Improvement of Hogs and Pigs Inventory Report
USDA is required to produce a simplified hogs and pigs inventory report, to be released monthly (which will be available on the Internet), eventually replacing the current quarterly publication (the quarterly report will be replaced after two years of availability of the monthly report). USDA must include in a separate category of the report, the number of bred female swine that are assumed, or have been confirmed, to be pregnant during the reporting period.
Barrow and Gilt Slaughter Reporting
USDA is required to obtain through an appropriate collection system or valid sampling system at packing plants, information on the total slaughter of swine that reflects differences in numbers between barrows and gilts. This report is to be published at least weekly.
Average Trim Loss Correlation Study & Report
USDA is mandated to contract out "a correlation study and prepare a report establishing a baseline and standards for determining and improving average trim loss measurements and processing techniques for pork processors to employ in the slaughter of swine."
Reporting on Swine Packer Marketing Contracts
Subject to annual appropriations, USDA is to establish and maintain an electronic library or catalog of each type of open marketing contract offered by packers to swine producers, including all available noncarcass merit premiums, being offered by packers to swine producers. Notice of such types of contracts being offered are to be made available to the public upon request or over the Internet.
GAO Study of Secretary's Jurisdiction Over Swine Processing
The General Accounting Office (GAO) is to conduct a comprehensive study of the Secretary's powers and authorities to regulate the swine slaughtering and processing sector under the Packers and Stockyards Act of 1921 and all other federal laws and precedents that shall commence with passage of this legislation. The GAO must analyze the "burdens on and obstruction to commerce in swine, pork, and pork products by packers" and "noncompetitive pricing arrangements between or among packers" as well as other issues.
Lamb Reporting Provisions
The Secretary is provided authority to create a price reporting program for lamb that will provide timely, accurate, and reliable market information. If the Secretary establishes a mandatory price reporting program, the Secretary must initiate the rule-making process and provide an opportunity for comment on proposed regulations during the 30-day period beginning on the date of the publication of the proposed rule.
Publication of Information on Retail Prices for Representative Meat Products
The Secretary is required to compile and publish at least monthly (weekly, if practicable) information on retail prices for representative food products made from beef, pork, chicken, turkey, veal, or lamb. To ensure the accuracy of such reports, the Secretary is required to obtain the information for the reports from one or more sources, including "a consistently representative set of retail transactions"; and "both prices and sales volumes for the transactions". The Secretary is to collect any such retail purchase information only on a voluntary basis; and will not impose a penalty for failure to provide the information or otherwise compel disclosure of such information.
Unlawful Acts & Enforcement
The legislation makes it a violation of the law for any packer to intentionally "fail or refuse to provide, or delay the timely reporting of, accurate information to the Secretary" or to request that a packer, or buyer or seller of livestock or livestock products fail to report accurate or timely information as a condition of any sale.
A packer or other person who willfully violates an order, rule or regulation issued by the Secretary under the statute may be assessed a civil penalty of not more than $10,000 for each violation. Each day that a violation continues will be considered to be a separate violation.
In determining the amount of civil penalty to be assessed, the Secretary is to consider the gravity of the offense, the size of the business involved, and the effect of the penalty on the ability of the person that has committed the violation to continue in business. The order of the Secretary assessing a civil penalty or issuing a cease and desist order under this section will be final and conclusive unless the affected person files an appeal of the order of the Secretary in U.S. district court not later than 30 days after the date of the issuance of the order.
Fees, Recordkeeping & Responsibilities
The Secretary is prohibited from charging a user fee, transaction fee, or any other type of fee for the submission or reporting of information, or for providing reports or information to the public.
Packers must maintain and make available to the Secretary on request for two years, the original contracts, agreements, receipts and other records associated with any relevant transaction and "such records or other information as is necessary or appropriate to verify the accuracy" of reported information. Packers also must maintain a record of "purchase of a lot of cattle or a lot of swine" with the date and information on whether the purchase occurred before 10:00 a.m.; between 10:00 a.m. and 2:00 p.m.; or after 2:00 p.m. (CST).
Meat packers are required to contact the Secretary, and the Secretary must make price reporting information available electronically. The Secretary is responsible for devising rules to preserve confidential business information and ensure compliance and enforcement of the statute.
Implementation & Federal Preemption
Not later than 90 days after the date of enactment, the Secretary is to publish proposed regulations to implement the legislation. Final regulations are to be published within 180 days of enactment. The comment period on the proposed legislation will be a 30-day period beginning on the date of publication of the proposed rule.
The legislation preempts state legislation regarding mandatory livestock reporting programs. The statute will terminate five years after the date of enactment without Congressional reauthorization.