Pork Producer Testimony

John Caspers - Farm Bill Testimony

Mr. Chairman and Members of the Committee:

My name is Jon Caspers. I am a pork producer from Swaledale, Iowa and serve on the Board of Directors of the National Pork Producers Council (NPPC).

The U.S. pork industry represents a major value-added activity in the agricultural economy and a major contributor to the overall U.S. economy. The $8.7 billion of gross receipts from hog marketings in 1999 represent only a portion of the economic activity supported by the industry. Although the U.S. hog industry has undergone changes in recent years, over 575,595 US residents are involved in various aspects of the industry ranging from input suppliers to producers, to processors and handlers as well as mainstreet businesses that benefit from purchases by people in these industries. Overall, the U.S. hog industry uses fully 16 percent of the soybeans and 12 percent of the corn raised in America.

Changing Pork Industry Trends

Global competition, new technologies, and consumer demands are but a few of the factors that are rapidly changing the U.S. pork industry. Hogs are raised differently today than even just 20 years ago. Hog farms are managed in new and innovative ways. Hogs are marketed on a carcass weight-carcass merit basis verses the traditional live weight selling in the past. Both producers and the packing industry are vastly more efficient but much less flexible than in the past.

Consumer attitudes will determine the future face of the U.S. pork industry. Consumers are generally more demanding about what they eat, its nutritional content and taste. They are more cognizant of and more accepting of familiar brands than ever before which is leading producers into new and exciting marketing and production alliance opportunities and market segmentation and differentiation. Coordination of the production and processing chain with consumer demands is more and more critical to the success of all industry participants, but perhaps most critical to the future of producers.

The pork industry is becoming increasingly global and more competitive than ever before. Because of the internet and the nature of global communications, information and technology are extremely mobile and instantaneous. Canada, the EU, Brazil and Argentina are becoming worldwide competitors as their industries grow and mature.

Food Safety and environmental protection will play an ever-greater role in the decisions made on the farm. Consumers expect meat to have zero risk of food borne pathogens, while also demanding a reduction in the amount of antibiotics involved in livestock production. Environmentally, agriculture is moving inexorably from an unregulated to a regulated industry, driven again by consumer desire for food produced with little adverse environmental impact. Nutrients in rivers and streams caused by farm runoff will no longer be an acceptable byproduct of productive modern American agriculture in the future.

Conservation Provisions

Mr. Chairman, the country's pork producers are extremely pleased and excited that the 2002 farm bill debate is focusing on conserving working agricultural lands, keeping them productive, profitable, and at the same time enhancing the environmental benefits they provide. Your bill, the Conservation Security Act (CSA), is one of the big reasons that the debate has turned in this direction, and we welcome your efforts and commend you for them.

We also note that the Committee's Ranking Member, Senator Lugar, is working on a fine conservation bill with many valuable policy proposals. Again, keeping working lands working while conserving and enhancing our natural resources is the emphasis of his bill, and we cannot overestimate just how critical it is that your final farm bill keep this emphasis on working lands. It is all too easy for many not directly involved in agriculture to slip into thinking that farmers and ranchers should become some type of "eco-managers." This is not a farmer’s or a rancher’s vision for what conservation and environment policies should be. We want agriculture to produce agricultural goods, profitably, and be protective of the environment. Thank you for introducing a bill that works in this direction, and for your willingness to work with all sectors of agriculture toward that end.

In many ways, Mr. Chairman, NPPC is neutral to the type of specific vehicle used to meet livestock agriculture's critical need for livestock waste management assistance. Our own emphasis has been on amendments to the Environmental Quality Incentives Program (EQIP), for the simple reason that it is a program we and the USDA know and understand, and because straightforward steps can be taken to make it work properly and successfully. Most of the comments we offer below relative to our need for livestock waste management assistance are therefore directed toward amending EQIP. We have been reluctant to contemplate a separate, significantly complicated and new programmatic approach, not because it could not work or help us, but because we wanted to take the straightest path to our goals. That being said, we recognize that many of the things we seek are reflected in your CSA, and we keep an open mind as to the right combination of EQIP and CSA-like provisions the Senate's conservation title should ultimately contain.

Since the start of this debate last year, the organizations representing the majority of the livestock and poultry producers in the country have consistently demonstrated the need for approximately $1.2 billion a year over 10 years to address manure management needs. The need is immediate and pressing. We know that the needs of the livestock sector far exceed these planned increases. For example, since 1997, EQIP has not been able to fund 196,000 contract applications for $1.4 billion in environmental practices. Of that, $800 million came from livestock producers alone. As we have stated in previous testimony on this topic, livestock and poultry producers face, or will soon face, costly environmental regulations as a result of state or federal law designed to protect water and air quality. In addition to state requirements, the regulations will come from the Clean Water Act TMDL program, the proposed CAFO permit requirements, and the Clean Air Act.

The following table summarizes the conservation funding needs of livestock operations with 50 animal units or more.

Senator Lugar's bill, which would provide EQIP with $1.5 billion a year, to be allocated to row crop and livestock agriculture, will help us meet this need, particularly since his bill will not prescribe a specific percentage of EQIP funds dedicated to livestock versus and row crops. At the same time, we think it likely that some form of equitable and even split of this $1.5 billion annually between livestock and row crop agriculture will take place, leaving us with less than we need. The above analysis leads us to respectfully request that the committee take full advantage of any opportunity that may exist to expand EQIP funding further to come as close as possible to the $1.2 billion a year level of assistance needed by the livestock and poultry sectors.

There are several specific issues that we would like to address as you know prepare final legislative language for the conservation title of your farm bill. We have stated many of the following comments and positions in previous testimony, but they bear repeating and need to be placed in the context of the existing statute.

We feel very strongly that livestock and poultry producers must be eligible for conservation cost share or incentives assistance regardless of the size of their operations.

The public clearly wants improved environmental performance and greater environmental benefits from our operations, large and small, and we are anxious to meet these goals. For decades, the federal government has provided billions in assistance to large, municipally owned water and sewage treatment facilities. Every person living in these municipalities has benefited as result, paying less than the true cost for these services, and gaining a cleaner environment as well. We see little difference between these situations and those facing livestock producers today. If society values keeping as many livestock operations as independent as possible, and also values a cleaner environment, then livestock agriculture is prepared to work with the public sector to meet these goals.

The environmental regulations and expectations livestock producers face do not distinguish among operations on the basis of size and we see no reason why assistance to livestock operations to meet these environmental objectives should discriminate on that basis. Family owned or operated livestock operations come in all sizes, and all of these will need cost share assistance if they are to remain economically viable while providing the public with the environmental benefits they obviously seek. It is our view that, without question, any EQIP provision that excludes operations simply on the basis of the number of animals will end up excluding thousands of family owned operations struggling to remain as independent as possible. Many of these producers and their families have made the hard, difficult and expensive choice to expand the size of their operations to capture economies of scale and to take advantage of the most efficient technologies available. We see no justification for penalizing or excluding these operations at the very time when society is demanding a higher level of environmental performance.

We believe that a payment limitation approach, comparable to that used in row crops is a far more appropriate policy approach, except that payments should not be limited by year but by the needs of the overall EQIP contract. We believe a minimum of $200,000 per contract is needed for this work, and even that will be too low in many cases. For example, the Environmental Protection Agency's analysis for the proposed CAFO rule assumes it will cost a 3,444 head farrow to finish swine operation in the Midwest $332,000 in capital costs to comply with the proposed rule. It will also cost approximately $26,000 a year for annual recurring activities for this operation to operate and maintain its new system.

The surest way to help keep independent both the independent swine producer selling pigs on the spot market and the independent producer selling through a contract to a processor, is for USDA to provide financial and technical assistance for the manure management systems necessary. A $200,000 payment limitation would help may of these producers meet their livestock waste management needs without having to turn to the processors for loans or other forms of capital cost sharing arrangements. Many assume that processors should cover the costs of the needed waste management systems. But we believe the only way to force processors to do this also would lead to independent producers becoming more dependent on processors. In many cases, the rational economic choice for the processor would be to purchase the independent producers' facility outright. Further concentration in the swine sector would be the inevitable result, an outcome this Committee and NPPC both want to avoid.

We also note that a $200,000 payment limitation would effectively prevent large processors producing their own hogs with processor-owned production facilities from using EQIP. Such operations are so large, on the order of hundreds of thousands of head, that a $200,000 contract would not be worth the time and effort to pursue.

We feel that protecting water and air quality as it relates to livestock and poultry manure management must be national priorities for EQIP. We encourage your final bill to ensure the program has both of these among its top priorities. We also believe that while the installation of EQIP conservation practices can and will provide benefits to wildlife, the goal of wildlife habitat preservation should not be a purpose of EQIP. In our view, the Wildlife Habitat Incentives Program (WHIP) is the best programmatic home for helping producers practice wildlife conservation on working agricultural lands. We encourage you to remove wildlife as an explicit purpose of EQIP, and support Senator Lugar's proposal to substantially increase funds for WHIP to meet the worthy goals of protecting habitat.

Explicit provisions must be enacted that structure and support the joint effort that will be needed from federal, non-federal and private technical assistance providers to ensure that EQIP financial assistance will achieve its intended purpose. Our cost analysis referenced above incorporates technical assistance costs explicitly. We believe it is very important that this bill not adopt any limitation on the amount of technical assistance to be provided under EQIP that is arbitrary and otherwise not based on what it really costs to help producers design, install and manage conservation practices. Financial assistance is essential, but without full and qualified technical support, the financial assistance will fail. We want EQIP to succeed, and feel the old adage, "penny wise and pound foolish" definitely applies to this situation.

We feel that particular attention must be paid in the legislative language to ensuring that the program allows for the participation of third party private sector certified experts to supplement the technical assistance to be provided by USDA. We note that your CSA provides for the use of such persons, and we support your effort. The approach being suggested by Senator Lugar in his proposal is also very valuable. We welcome his proposal and thank him for his assistance. A voucher system is one way that could be used to meet this need, but there are several others, and we are prepared to offer, immediately, detailed suggestions regarding how this can be accomplished. Whatever the legislative approach taken, it must be well thought through and comprehensive, and ultimately subject to rulemaking through public notice and comment if it is to work properly and have the confidence of all involved.

We request that your bill address the issue of how EQIP will meet many of the nation's top conservation priorities that are not properly delineated on the basis of small geographic areas, like a watershed. The ability of the program to place emphasis on watershed-based assistance must be retained. But there is a substantial number of critical, high value, high priority conservation practices providing valuable environmental benefits that producers across broad parts of the country need assistance to implement. EQIP must place considerable and major emphasis on helping producers adopt these latter conservation practices that are not defined on the basis of a geographic area.

We also ask that your bill examine certain existing provisions of EQIP that add considerable administrative burden with little associated environmental benefit. In particular, we believe EQIP must retain its emphasis on producing significant and valuable environmental benefits, but that it should do so without the impractical and impossible condition of truly "maximizing" such benefits. The term maximization implies being able to compare accurately and equitably tens of thousands of EQIP conservation practices being implemented under entirely different field conditions and often for very different conservation purposes. Maximization under these conditions is unfeasible and not an appropriate objective. Instead, the program should emphasize securing substantial environmental benefits per dollar expended.

We also believe that changes are needed to clarify that an EQIP plan, while necessary to secure a contract for EQIP payments, is not needed to apply to nor be accepted into the program. The program should have proper procedures to govern application and acceptance into the program, but an EQIP plan is far too detailed and costly a requirement for this purpose. We also believe that the legislation must make clear that an EQIP plan can be designed to address only one conservation objective and involve only one eligible practice, and that contracts can be for one year to 10 years, depending on the conservation practices involved.

Many of these requested changes are addressed in Senator Lugar's proposal. While we believe the approaches he has taken on these matters can be refined and improved, they are definitely moving in the correct direction, and we ask that as you prepare your version of the conservation title that you take his proposals into account.

We want to reiterate that we are ultimately neutral to the legislative and programmatic approach taken to meet livestock agriculture's need for assistance as long as the programs can be understood and implemented by USDA without wasted time and resources, and that they work for producers. In particular, once a manure management system is planned, designed and implemented, producers will have annual costs for the ongoing maintenance of those systems. This could be done through the incentive payments approach in EQIP or through some other incentive payments program. Either way, we believe that an incentive payments program will work only if the payments are tied to real costs, according to conservation plans that are accountable and where producers will have ownership of the practices by also incurring cash or in-kind costs to implement them. The approach taken must ensure that producers be compensated fairly relative to producers across county, state and regional lines for the work and activities undertaken with the incentive payments.

Lastly, Mr. Chairman, the emphasis we are placing on keeping agriculture productive and profitable continues into our positions on the Conservation Reserve Program (CRP). We believe the CRP should be amended to make it a priority to keep working lands working. When an entire farm field is enrolled into the CRP, agricultural use of the field is lost for the term of the contract. The CRP should be amended to place emphasis on enrolling buffers and portions of field. The number of whole fields enrolled in the CRP program should be substantially limited. We do not support increasing the CRP's acreage cap, but if it must be done, it should only be for partial field, high environmental benefit practices.

Research

NPPC urges the Committee to double agriculture research funding over the next five years. Funding in agriculture research has remained flat for the last 15 years while other federal research has significantly increased. This trend is no longer acceptable. Additional money is needed to enable producers to continue to produce safe and better food.

NPPC believes that future animal research should be built around the goals of the Food Animal Integrated Research (FAIR) 2002. Those goals are:

1. Strengthen Global Competitiveness
2. Enhance Human Nutrition
3. Protect Animal Health
4. Improve Food Safety and Public Health
5. Ensure Environmental Quality
6. Promote Animal Well-Being

Trade Issues

Market Access Program (MAP) Authorization

NPPC has long supported increasing the authorization of the Market Access Program (MAP). At least a doubling of the current authorization, from $90 to $180 million per year is warranted. MAP and the Cooperator Program have been instrumental in helping boost U.S. pork exports.

Unlike other sectors of the global economy, the agricultural sector is still rife with subsidized exports. While programs such as MAP have been reduced in recent years, our foreign competitors have continued to heavily subsidize and aggressively promote their products in an effort to capture an increasing share of the world market at the expense of U.S. producers. In fact, a recent USDA study shows foreign competitor nations outspending the U.S. by as much as 20 to 1. These nations are spending over $100 million just to promote their products into the United States – more than what the U.S. currently spends under MAP to help promote exports of all American grown and produced commodities world-wide.

The MAP is a cost-share program through which farmers and other participants are required to contribute as much as 50 percent of their own resources to be eligible. Indeed, funding for pork export initiatives and foreign market development are largely supplied by the pork checkoff, which represents a percentage of the hog price received by the producer. The USDA Market Access Program and Foreign Market Development Program funds complement the pork checkoff expenditures in markets around the world. It has been and continues to be an excellent example of an effective public-private partnership.

Global Food Assistance

NPPC continues to support the creation of a new international school lunch program designed to help feed hungry children, improve nutritional standards and provide an outlet for surplus U.S. agricultural products. We feel that this program, the Global Food for Education and Child Nutrition Act, presents a promising opportunity for American producers to assist children in struggling areas of the world. NPPC cautions, however, that it is important for meat and dairy products to be fully represented to the greatest extent possible as this program goes forward.

Trade Promotion Authority Should Be Renewed

U.S. pork producers are major beneficiaries of the Uruguay Round Agreement and NAFTA. While a few bilateral trade agreements are theoretically possible without the passage of Trade Promotion Authority (TPA), the greatest benefits to American agriculture will come from the launch of a new multilateral round of negotiations, and that cannot happen without TPA. It is vitally important, both substantively, and symbolically, for the president to have TPA when ministers gather in November in Qatar in an attempt to launch a new round.

Since 1995, when the Uruguay Round Agreement went into effect, U.S. pork exports to the world have increased 55 percent in volume terms and 40 percent in value terms. In 2000 the U.S. exported a record 566,900 metric tons of pork valued at $1.316 billion. Pork exports from the U.S. to Mexico exploded in 1994 when NAFTA went into effect. Even with the devaluation of the peso U.S. pork increased market share in Mexico -- this never would have happened without NAFTA. Mexico is now the pork industry's second most important market behind Japan.

The United States is uniquely positioned to reap the benefits of liberalized world pork trade. U.S. pork producers are the lowest cost producers of the safest, highest quality pork in the world. But without the renewal of trade negotiating authority for the Executive branch by Congress, U.S. pork producers and the rest of U.S. agriculture will be forced to remain on the sidelines while other countries continue to negotiate new trade agreements at a staggering pace.

The rapidly expanding Brazilian pork industry -- a key competitor to the U.S. industry -- now has preferential access into many markets to the detriment of U.S. producers. Canada, another significant competitor, has gained preferential access into Chile and other Western Hemisphere nations through free trade agreements. While the United States sits idly by, Chile, Mexico, and Canada have wrestled away from the United States the mantle of the Western Hemisphere’s trade leader. These countries along with the European Union are gaining the benefits of trade for their citizens while the U.S. engages in an over-hyped dialogue about the benefits of trade.

Pork Producer Testimony

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Food Safety

Environment

Animal Health

Farm Bill