Copyright 1999 Federal News Service, Inc.
Federal News Service
SEPTEMBER 14, 1999, TUESDAY
SECTION: IN THE NEWS
LENGTH:
1663 words
HEADLINE: PREPARED STATEMENT BY
G.
CHANDLER KEYS
VICE PRESIDENT, PUBLIC POLICY, NCBA
BEFORE THE
HOUSE COMMITTEE ON AGRICULTURE
SUBJECT - THE CRISIS FACING
AMERICAN AGRICULTURE
BODY:
Thank you
Chairman Combest, Congressman Stenholm and Members of the Committee for holding
this hearing to discuss the crisis facing American agriculture. Once again, NCBA
commends your leadership and continuing efforts to examine the issues and
concerns of interest to cattlemen and women, and for working with us to find
ways to improve the profitability of U.S. beef production. I want to thank you
and your staff for providing me the opportunity to testify today on behalf of
our members.
I am Chandler Keys, Vice President for Public Policy of the
National Cattlemen s Beef Association.
You have heard this before from some
of our members who have had the privilege to testify before this Committee, but
I would state at the outset that the issues and factors affecting livestock
prices are complex and controversial. There is a wide range of opinions among
individual producers throughout the beef industry about the effects of
international trade agreements, packer concentration and improvements in price
discovery on the beef industry.
This is not just true at the producer level.
You will likely hear comments from other segments of the beef industry that fall
on either side of NCBA's testimony in terms of defining the problems and
developing workable, permanent solutions. Short-term issues in the quest for
long-term stability should not sidetrack us. NCBA believes that an open and
frank discussion -- such as is provided by this hearing -- of all issues facing
the cattle industry and the rest of agriculture is vital to this effort.
The
structural changes taking place in the beef industry have coincided with
international economic crises, increased regulatory burdens, the weather and the
normal cyclical nature of agriculture economics. How these factors are
inter-related is the basis of heated debates, emotional arguments and general
consternation by many within the beef industry. Some producers have embraced new
marketing techniques for their own advantage while others believe structural
changes are, at least in part, the cause of recent price declines.
Outlook:
NCBA is constantly monitoring the economics of the beef industry. Our
economists work with their counterparts at USDA, the universities and other
segments of our industry to ensure our members have access to reliable and
objective forecasts. The current outlook is for some price improvement over the
course of the year -- but then, that was our outlook for 1998. In this business,
you quickly learn not to hold your breath.
Over the past few years,
cattlemen have lost over $4 billion in equity. During the past three years, we
have been appreciative of the use of existing programs and authorities such as
domestic feeding program purchases, foreign aid, GSM, etc., to prevent the
losses to beef producers from being worse than what has been experienced.
Drought hit the Eastern Seaboard hard this past Summer and last year's
weather pressure and price situation contributed to high total beef supplies as
cattlemen culled more cows and sent more heifers to the feeders (rather than
retain them for herd replacements).
USDA's recently released mid-year (July
1) cattle inventory report indicated that all cattle and calves in the U.S.
totaled 106.8 million, a decline of 1 percent from a year earlier and the
smallest July 1 inventory since 1991. The number of cows and heifers that have
calved was 1 percent less than a year earlier. The number of heifers held for
beef cow herd replacement purposes (500 lbs. and over) declined 4.8 million head
-- 4 percent less than a year ago and about the same as the very low levels of
the late 1980's. The U.S. beef cowherd is continuing to shrink.
However,
there were two categories that posted an increase or no change from year earlier
levels -- heifers held as dairy cow replacements were up nearly 3 percent and
other heifers (feeder heifers) over 500 pounds were unchanged.
The 1999 calf
crop was estimated to be 38.3 million head, a decline of 200,000 to 300,000 head
from 1998 levels. The year-to-year decline in the calf crop was likely moderated
by favorable conditions for calves born this past winter ang. The size of the
calf crop suggests that fed cattle slaughter in the second half of 2000 may be
slightly larger than many analysts had previously forecast. Based on current
inventories, cattle slaughter in 2000 will post year-to-year declines.
Aggressive placements of cattle into feedlots and the smaller calf crop reduced
the estimated July 1, 1999 feeder cattle supply outside of feedlots by nearly
700,000 head (-1.6 percent) from a year earlier.
Cattle on feed in the U.S.
increased 4 percent from a year earlier as of July 1, 1999. USDA reported that
the July 1 feedlot inventory included 5 percent more steers and 3 percent more
heifers than at the same time a year earlier. Placements of cattle into feedlots
continued to surge in June as placements for the month increased 14 percent and
15 percent respectively for the United States and for the historically reported
7-states feedlots with a capacity of 1,000 head or more.
Most of the
year-to-year increase in placements during June was feeder cattle weighing more
than 700 pounds. Fed cattle marketed during June increased 5 to 6 percent above
year-earlier and 1997 levels. Aggressive marketing kept the calculated number of
cattle that have been on-feed for 120 days or more below a year ago. Still, fed
cattle slaughter weights increased seasonally during recent weeks and are now
essentially the same as weights a year ago.
Fed cattle prices are expected
to moderate slightly in the coming weeks before increasing into year-end. Fed
cattle prices in the Southern Plains averaged $59.12 and $61.33 during the third
and fourth quarters of 1998, respectively. During the second half of 1999,
slaughter steer and heifer prices are expected to increase about 5 percent
compared to 1998 prices ($62 and $64.40 during the third and fourth quarters).
During 2000, fed cattle prices should continue to increase above year-earlier
levels as they continue to be supported by low feed grain prices, smaller feeder
cattle supplies, and higher fed cattle prices.
While this should cause a
hint of a smile, beef producers have been battling this price situation for
going on four years. Another ten months is a long time to hope, particularly if
you are sitting across from your banker.
Mr. Chairman, the bottom line
challenge beef producers face is, "How do we improve demand?" A close second is,
"What can we do to address those critical "margin" issue that keep the nickels,
dimes and quarters in our pockets while we continue our search for dollars of
profit?" By focusing on long-term solutions that keep that ray of hope shining
at the end of the tunnel, there are policy areas that are currently being
debated in Congress that if enacted, will keep agriculture profitability moving
in the right direction.
An easy one is tax reform. I know there is a
lot of debate regarding what is the right level of tax cuts and that the
President will reportedly veto the package approved by Congress just prior to
August recess. However, the tax measure approved includes provisions that are
strongly supported by beef producers and their families, namely:
*
Death tax repeal
* Capital gains reduction
* Farm and
Ranch Risk Management Accounts
* 100 percent deductibility of health
insurance premiums for the self-employed
* Alternative Minimum Tax relief.
NCBA took to heart the challenge issued by House Agriculture Committee
Chairman Combest and Ranking Minority Member Stenholm in their joint statement
of March 8, 1999, which called on producers and the big packers to sit down
together and work out a compromise on livestock market reporting. This directive
helped break an ongoing stalemate between producers and packers that has
restricted information flow throughout the beef marketing system and prevented
price reporting from evolving to reflect changes in the way cattle are marketed.
We certainly have appreciated the Committee's leadership on this issue and
look forward to working with all Members to ensure that mandatory price
reporting becomes a reality before Congress adjourns this Fall.
Aggressive
pursuit of solutions to trade disputes, unfair trade restrictions and barriers
to U.S. agricultural products is another key area. The WTO Ministerial meeting
is a little over a month away. The frustrations with the European Union in
particular begs for some hard- nosed discussions with some of our trading
partners on what America not only expects, but will demand, to ensure continued
support for international trade agreements by U.S. producers.
Regarding
direct payments, NCBA has consistently supported assistance to producers to
alleviate the impact of weather-related disasters. However, we have long opposed
direct cash payments to any livestock sector to alleviate adverse market
conditions. Direct payments to address economic conditions affecting all
livestock producers do nothing to alleviate the supply/demand situation that
typically is the root cause for low prices.
Additionally, when one livestock
sector receives such payments, it creates inequities relative to other livestock
commodities. Virtually all sectors of agriculture are facing tough times. NCBA
has, and will, continue to support common sense efforts to restore viable market
prices for beef, pork and other agricultural commodities through existing
authorities and programs such as domestic feeding program purchases, foreign
aid, GSM, Market Access Program (MAP) etc.
Mr. Chairman, silver bullets are
hard to find. The impacts of unintended consequences that can result from
government intervention are usually difficult to recover from. We strongly urge
that careful and thorough economic, market and trade analyses of the impacts of
any solutions that Congress might consider be completed before consideration
begins.
END
LOAD-DATE: September 15, 1999
