Animal Agriculture Issues in the 107th Congress: A Retrospective

Report for Congress
Animal Agriculture Issues
th
in the 107 Congress:
A Retrospective
March 14, 2003
Jerry Heykoop
Analyst
Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

Animal Agriculture Issues in the 107 Congress:
A Retrospective
Summary
A variety of animal agriculture issues, including prices, the impact of
consolidation in the meat production/packing industry, trade, and the environmental
impacts of large feedlots, generated interest in the 107^th Congress.
The farm bill (P.L. 107-171; H.R. 2646), signed by the President on May 13,
2002, contained several provisions affecting animal agriculture, including protections
for contract growers, disaster assistance, required country-of-origin labeling for
consumer meat products, and increased funding for conservation purposes.
USDA announced on September 19, 2002, that it would provide $752 million
in special funds for a new Livestock Compensation Program. In early December
2002, total funding was increased to $937 million. The program was to compensate
livestock producers experiencing severe 2001 and 2002 feed and pasture losses.
Checkoff programs, under which producers are required to fund market
promotion and research activities, continued to face legal challenges. In particular,
the beef and pork checkoff programs were the subject of court challenges by
segments of the industry who oppose them.
Concerns about the impact of consolidation in the livestock industry and the
agricultural sector overall, spurred legislative interest. In the farm bill, a Senate
provision banning packer ownership of livestock was dropped in conference, but the
issue may resurface in future legislative proposals.
The FY2001 USDA appropriations law (P.L. 106-387) contained a mandatory
price reporting provision that required large meat packers to report prices they pay
for cattle and hogs, among other provisions. The provision was implemented on
April 2, 2001, but problems arose with reporting of prices. USDA implemented
changes to fix those problems and increased the frequency of reporting.
On August 23, 2002, USDA announced that Russia had lifted a ban on U.S.
poultry imports that had been in place since March 10, 2002. The ban stemmed from
Russian concerns over antibiotics in feed and the use of chlorinated water during
processing. Disputes continued with the European Union over its barriers to U.S.
meat and poultry imports.
On February 12, 2003, the Environmental Protection Agency published in the
Federal Register new rules for operating permits for concentrated animal feeding
operations. The proposal includes the objectives of preventing discharges from
manure-storage lagoons, and limiting the spreading of manure to protect waterways.
(This report will not be updated.)

Contents
In troduction ......................................................1
Economic Overview of the Sector.....................................2
Emergency Assistance..............................................2
In Congress..............................................4
USDA Actions............................................4
Farm Bill................................................5
Commodity Promotion Programs (Check-Offs)..........................5
Beef ....................................................5
Pork ....................................................5
Farm Bill................................................6
Competition and Industry Structure....................................6
Concentration in Animal Agriculture..............................6
Government Response......................................7
In Congress..............................................8
Farm Bill................................................8
Banning Packer Ownership of Livestock............................8
In Congress..............................................9
Mandatory Price Reporting......................................9
Trade ..........................................................10
Russia (Poultry)..............................................10
Europe (Beef)................................................11
Country-of-Origin Labeling.....................................11
Farm Bill...............................................11
Environmental Issues..............................................12
Farm Bill...............................................14
Animal Health...................................................14
“Mad Cow” Disease...........................................14
Humane Slaughter............................................15
Farm Bill...............................................15
(This report was edited for publication by Geoffrey S. Becker, specialist in
agricultural policy, Resources, Science, and Industry Division. Questions about it
should be directed to him at 7-7287.)

th
Animal Agriculture Issues in the 107
Congress: A Retrospective
Introduction
A variety of issues important to animal agriculture, including farm prices, the
impact of consolidation in the meat production/packing industry, trade, and the
environmental impacts of large feedlots, generated significant interest in the 107^th
Congress. These and other issues were the focus of both hearings and legislative
proposals during 2001 and 2002.
The 2002 farm bill (P.L. 107-171; H.R. 2646), signed by the President on May^th
13, 2002, was the major legislation of interest to animal producers during the 107
Congress. This omnibus law, which covers a broad range of agricultural, food, rural,
and related topics, includes a number of provisions specific to animal agriculture.
Among them are: protections for growers who have contracts with
processors/integrators; authorization of disaster assistance; new country-of-origin
labeling (COOL) requirements for fresh meat products; and increased funding for
conservation and environmental protection purposes.
Among additional bills that were introduced, but not enacted, were those that
would have: extended oversight by USDA’s Grain Inspection, Packers, and
Stockyards Administration (GIPSA) to the poultry industry (H.R. 231, S. 1076);
provided for new measures in dealing with agricultural mergers (H.R. 1526, H.R.
3383, H.R. 3810 S. 1076); prohibited slaughter of horses for human consumption
(H.R. 2622, H.R. 3781); authorized the Secretary of Agriculture to establish a
program to control bovine Johne’s disease (S. 1595); required microbiological
performance standards for federally inspected meat and poultry plants; and an animal
identification system that would have facilitated the trace-back of meat and poultry
to the live animal (S. 2532).
Some provisions in unenacted bills could be reintroduced in the 108^th Congress.
The new Congress also may conduct oversight of initiatives adopted by their
predecessors, such as the new country labeling rules and implementation of
environmental/conservation programs.

Economic Overview of the Sector
In 2001, U.S. farmers received $106.4 billion from the sale of animal products,
about 52% of all U.S. farm cash receipts. For 2002, projections were lower ($97
billion and almost 49%) according to the U.S. Department of Agriculture’s (USDA)
Economic Research Service (ERS). Still, such figures provide an indication of the
relative importance of animal production to U.S. agriculture – an importance that
would be magnified further if the size of the crop sector devoted to animal feed were
added to this value.
The data in table 1, on page 3, provide some indication of current and projected^th
economic conditions in the meat and poultry sectors during the period of the 107
Congress. These conditions provided a backdrop for the issues addressed.
Emergency Assistance¹
Many of the Western, Great Plains, and Eastern states were affected by
persistent drought in 2002, which had an impact on the regions’ crop and livestock
production. USDA offered several ongoing programs to help farmers recover
financially from a natural disaster, including emergency disaster loans.
In past years, Congress approved various forms of additional ad-hoc emergency
disaster assistance – primarily crop disaster payments and emergency livestock
assistance. Since these ad-hoc programs last applied to only calendar year 2000
production losses, Congress had considered making assistance available for 2001 and
2002 losses. Although no action was taken in the 107^th Congress, the issue was
expected to be considered again early in the 108^th Congress. (For an update on action
in the new Congress, go to the link in footnote 1.)
At issue was whether proposed ad-hoc disaster assistance should be provided
without equivalent reductions in spending on other programs. Proponents of
additional assistance claimed that available programs were not adequately addressing
farmers’ needs. The President stated that the new farm spending authorized by the
omnibus 2002 farm bill (P.L. 107-171) —estimated at $52 billion over six years by
the Congressional Budget Office (CBO)— could provide adequate farm commodity
support, and that any additional assistance should be offset with reductions in other
spending.

¹ CRS contact: Ralph Chite 7-7296. See CRS Electronic Briefing Book on Farm Disaster
Assistance at: [http://www.congress.gov/brbk/html/ebagr48.html]

Table 1. Meat & Poultry:
Selected Production, Price, Consumption, and Trade Data
Beef 2001 2002(est.) 2003(proj.)
Production (million lbs.)26,10727,08125,700
Fed steer prices ($/100 lbs.)72.7167.0472-77
Feeder steer prices ($/100 lbs.)88.2080.0484-89
Consumption (lbs. per cap.)66.267.464.4
Beef/veal exports (million lbs.)2,2692,5002,565
Beef/veal imports (million lbs.)3,1643,2103,305
Pork
Production (million lbs.)19,13819,68119,390
Hog prices ($/100 lbs.)45.8134.9237-40
Consumption (lbs. per cap.)50.251.350
Pork exports (million lbs.)1,5601,6191,645
Pork imports (million lbs.)9511,0571,080
Sheep
Lamb/mutton production (million lbs.)223219217
Lamb prices ($/100 lbs.)72.0472.5670-75
Consumption (lbs. per cap.)1.11.21.2
Lamb/mutton imports (million lbs.)146162172
Broilers
Production (million lbs.)31,26632,26232,525
Broiler prices (cts./lb.)59.1055.6057-61
Consumption (lbs. per cap.)76.680.179.3
Broiler exports (million lbs.)5,5554,8655,250
Turkeys
Production (million lbs.)5,5625,6965,700
Prices (cts./lb.)66.3064.5064-69
Consumption (lbs. per cap.)17.517.517.7
Turkey exports (million lbs.)487456490
^So^urce:^Econ^om^{ic R}^e^s^earch^Serv^ice,^Lives^{tock, Dair}^{y, &}^Poultr^{y Outlook}^{, Jan}^u^a^ry^{16, 2003.}

In Congress. The 107^th Congress adjourned without taking final action on a
disaster assistance package. On September 10, 2002, the full Senate agreed to a
Daschle amendment (S. Amdt. 4481) to the FY2003 Interior appropriations bill (H.R.
5093), which would have provided an estimated $6 billion in crop and livestock
disaster assistance to farmers for both 2001 and 2002 production year losses. The bill
did not clear the Senate floor. The adopted Daschle amendment would have
provided “such sums as are necessary” to fully fund crop and livestock disaster
payment formulas that were last used for 2000 production losses, at a CBO-estimated
cost of $5.95 billion ($4.5 billion for crop assistance and $1.45 billion for livestock
assistance). The House-passed version of H.R. 5093 contained no comparable
disaster provisions.
USDA Actions. While action was pending in Congress, USDA implemented
several administrative measures to help mitigate the financial effects of drought and
other natural disasters. USDA announced on September 19, 2002, that it would
provide $752 million for a new 2002 Livestock Compensation Program (LCP). In
early December 2002, USDA added $185 million in available funding to the
program, bringing potential total payments to $937 million. The program was
designed to compensate livestock producers experiencing severe 2001 and 2002 feed
and pasture losses. USDA began accepting applications on October 1, 2002, and
continued to do so until December 13, 2002. As of December 16, 2002, $738 million
of the $937 million available in the program had been obligated to livestock growers.
Of the amount obligated, approximately 45% of the total had been disbursed in six
states: Nebraska ($63 million), Oklahoma ($58.8 million), Missouri ($58 million),
Texas ($55.4 million), Kansas ($53.4 million), and South Dakota ($50.3 million).
Under the program, direct payments were being made to producers of beef, milk
cows, sheep, and goats in any county declared a disaster area by the Secretary
between January 1, 2001 and September 19, 2002 (including disaster designation
requests pending on September 19, 2002 that were approved subsequently). The
payment rates were set at $31.50 per adult dairy cattle, $18 per adult beef cattle,
$13.50 for certain livestock over 500 lbs, and $4.50 per sheep or goat. Payments
were limited to $40,000 per person, and were not to be made to any person with
qualifying gross revenue over $2.5 million. Funding for the program was provided
through Section 32 funds, which originate from a portion of customs receipts that are
made available to USDA to support the farm sector through various activities.²
Further, on September 9, 2002, USDA announced it would purchase up to $30
million of pork products for use in school feeding and nutrition programs to provide
a boost to pork producers suffering from low prices. USDA already had purchased
13.8 million pounds of pork products for the 2002-2003 school year, and additional
purchases were expected to bring the total up to 66 million pounds. This compares
to 29.9 million pounds for the 2001-2002 school year and 22.8 million pounds in

2000-2001.

² For background, see CRS Report RS20235, Farm and Food Support Under USDA’s
Section 32 Program.

USDA also exercised its standing authority to release a portion of its inventory
of nonfat dry milk purchased under the dairy price support program, which was
converted into $150 million of livestock feed and provided to certain
drought-stricken states. USDA also allowed all farmers and ranchers nationwide to
cut hay and graze livestock until November 30, 2002 on acreage that was set aside
for certain conservation use. Emergency grazing was extended until December 31,

2002, in Colorado, Texas, Utah, and Washington.

Farm Bill. The 2002 omnibus farm law (P.L. 107-171, §10104) permanently
authorizes livestock assistance, subject to annual appropriations, and at the discretion
of the Secretary of Agriculture.
Commodity Promotion Programs (Check-Offs)
Supporters of check-off programs, which fund advertising, research, and other
market-enhancing activities, view them as self-help; government involvement and
cost are minimal. Producers and, often, importers are required to fund the programs
through assessments, usually deducted from revenue at time of sale (thus the name
check-off). USDA’s role largely is limited to administrative and oversight duties.
The mandatory aspects of check-offs have generated strong opposition among
some farmers, who contend they must pay “taxes” for activities they would not
underwrite voluntarily. Groups representing these producers have challenged the
programs in USDA and the courts. Two cases reached the U.S. Supreme Court,
which was asked to decide on whether the programs violate the free speech
provisions of the First Amendment.
Beef. In 2001, the Supreme Court found in United States v. United Foods, Inc.
(533 U.S. 405,412 (2001)) that the mushroom check-off infringed upon free speech.
The Court’s decision potentially impacts other legal challenges of some of the 15
operational, federally-authorized check-off programs. On June 21, 2002, a U.S.
District Court in South Dakota agreed that the national beef check-off also violates
the First Amendment. The court ordered all beef assessments to halt by July 15,

2002, but the order was stayed while the U.S. Government appealed the ruling.

Pork. In August-September 2000, USDA conducted a non-binding referendum
on whether to continue the pork check-off at the behest of several producer groups
led by the Campaign for Family Farms. The groups prevailed to end the program, but
the National Pork Producers Council (NPPC) subsequently won a temporary
restraining order to prevent USDA from publishing a final termination rule. A
February 2001 settlement agreement was reached, whereby the checkoff would
continue with modifications, including assurances that the check-off board would
operate independently of NPPC and be more responsive to producers’ concerns about
its activities. In addition, USDA will conduct a survey in June 2003, and if 15% of
producers and importers favor a binding referendum, it will be held within one year.³

³ Additional information about the settlement and related issues is available at:
(continued...)

Legal challenges to the pork check-off continued. In October 2002, a U.S.
District Judge in Michigan ruled that the check-off violates free speech, and ordered
a halt in collection of funds, effective November 25. The Department of Justice
requested the Sixth Circuit Court of Appeals to stay the ruling, and a stay was
granted, allowing collections to continue, awaiting the appeals process.
On September 16, 2002, USDA published a final rule (effective September 30,
2002) in the Federal Register to reduce the assessment rate from 0.45% (45 cents per
$100 of hog market price) to 0.40%, as recommended by the National Pork Producers
Delegate Body. USDA also decreased assessments on imported pork and products
to reflect the combined effect of the increase in the 2001 average price for domestic
barrows and gilts and the proposed 0.05% decrease in the assessment rate. The
assessment change will decrease annual funding of the check-off program by an
estimated $5-$6 million annually with an estimated $290,000 decrease in importer
assessments.
Farm Bill. §10607 of the farm law exempts from any commodity check-offs
persons who produce and market 100% organic products.
Competition and Industry Structure
Concentration in Animal Agriculture
A continuing trend toward consolidation within agriculture generated legislative
interest in the effect of concentration and consolidation on U.S. agriculture. Strong
interest by producer groups and policy makers grew out of the ongoing changes in the
structure and business methods of the livestock industry, including consolidation of
production and processing into fewer and larger operations, more vertical integration
(i.e., ownership or increased control of more than one phase of production and
marketing by a single firm), and the gradual shift from mainly open cash markets to
private contracts or other marketing agreements between buyers and sellers. At issue
were the impacts —positive and negative— on traditional producers, rural
economies, consumer choices and prices, and the environment, and the role, if any,
that government should play.
Many animal producers believe increasing concentration and other changes have
resulted in a less open market environment and contributed to the lower prices they
have been receiving. That is, as meat packers (i.e., those who slaughter and process
animals) acquire more of their slaughter needs via ownership, contracts, or marketing
agreements, they purchase fewer animals on the spot (public) market, thus reducing
spot prices paid. USDA and other analysts generally believe that other factors,
notably imbalances in supply and demand, are much more significant factors.
Additionally, analysts have said that contracts provide more stable prices than the
spot market, giving producers further incentives to enter into contracts.

³ (...continued)
[ h t t p : / / www.a ms .us da .gov/ l s g/ mpb/ por k.ht m] .

Economists explain that production and processing firms become larger in order
to capture lower per-unit costs when operating at or near full capacity. They argue
that vertical coordination and use of advance marketing arrangements are a reflection
of today’s agricultural markets, which are shifting from the production of a few
homogenous commodities without a particular market in mind to creation of a wider
variety of specific, consistently high-quality consumer products for specific markets.
Negative impacts of consolidation include potential environmental impacts and
several related issues. The trend toward fewer but larger operations, coupled with
greater emphasis on more intensive production methods and specialization, has
concentrated more animal waste within some geographic areas, according to the
Environmental Protection Agency (EPA). Other critics have raised so-called quality-
of-life issues related to the loss of small “family style” operations on the one hand,
and the growth of large “factory style” operations on the other.
The hog industry especially has been consolidating rapidly in recent years. At
the packer level, the four largest firms’ share of hog slaughter reached 56% in 2000,
compared with 40% in 1990. In 1997, 64% of all hogs were marketed through some
form of forward sales arrangement between producers and packers, although less than

10% of all hogs involved entire or partial packer ownership.

According to USDA’s Economic Research Service (ERS), larger producers
(5,000+ head) in recent years have accounted for nearly three-fourths of the pig crop,
compared with just over one-fourth in 1994. Expanding production is a much more
complicated and expensive process than in the recent past, more so for smaller
producers, industry analysts say. Expansion processes now include securing large-
scale financing, obtaining building and waste management permits from state and
local authorities, and hiring and training staff. In contrast, 15 to 20 years ago, many
smaller producers maintained multi-use buildings for rapid re-population of a hog
herd when returns turned favorable. Necessary construction was accomplished
without complicated procedures needed to manage waste. Family labor typically
provided adequate supplies of skilled herdsmen. The factors that affect expansion
patterns today are likely those that are muting the peaks and valleys of the hog cycle
– thereby leading to less variable hog prices, analysts conclude.
The poultry industry has been almost entirely vertically integrated for decades,
and has had significant vertical integration almost from the beginning as a
commercial industry. The pork industry is increasing its vertical integration and
becoming more similar to the poultry industry in structure. In the cattle sector, the
four largest beef packers accounted for 69% of all cattle slaughtered in 2000,
compared with 59% in 1990. However, structural change generally in the beef
industry has not been as dramatic in recent years as it has been for the hog industry.
Government Response. Government-sponsored studies have been
inconclusive on the relationship between agribusiness consolidation and farm prices.
One, Concentration in Agriculture: A Report of the USDA Advisory Committee
(June 1996), confirmed widespread producer distrust of cattle pricing and
procurement by packers. Among its recommendations were improved market data
collection (to reflect modern marketing practices), better access to the data by all
segments of the industry, and more vigorous enforcement of existing antitrust laws.

USDA has undertaken a number of actions intended to address concentration
and to promote competition, including: (1) enhanced reporting of livestock prices and
other marketing data, (2) expanded investigations of procurement and pricing
practices in the fed cattle, hog, and lamb sectors, and of poultry companies’ contracts
with growers, and (3) an overhaul of the Grain Inspection, Packers and Stockyards
Administration (GIPSA), to strengthen its ability to investigate and prosecute anti-
competitive practices under the Packers and Stockyards Act (P&S Act).
In Congress. In the 107^th Congress, the Senate Agriculture Appropriations
Subcommittee held a hearing on May 17, 2001, on agricultural concentration.^th
Earlier, in the 106 Congress, the Senate Agriculture Committee held hearings on
concentration in agriculture, including the livestock industry, on January 26 and July
27, 1999, and again on February 1 and April 27, 2000. The House Agriculture
Committee held a similar hearing on February 11, 1999. Two Senate Judiciary
Subcommittees held hearings on September 25 and September 28, 2000. No
consensus on what actions to take were reached in any of these hearings. A
September 2000, report by the General Accounting Office (GAO) determined that
GIPSA lacks the staff, the budget, and the expertise to investigate anticompetitive⁴
behavior in the livestock industry. Among GAO’s recommendations were calls for
an earlier integration of attorneys in the planning and review of investigations, and
for closer consultations between GIPSA, the Department of Justice (DOJ), and the
Federal Trade Commission (FTC) during investigations. A requirement that USDA
implement GAO’s recommendations for improving the administration of the P&S
Act was signed into law on November 9, 2000 (The Grain Standard and Warehouse
Improvement Act of 2000; P.L. 106-472).
Farm Bill. The 2002 farm law contains a new provision to extend GIPSA
authority to include swine production contracts (Sec. 10502). (Previously, GIPSA
protected broiler farmers who grow under contract and livestock producers who sell
directly to packers, but did not have authority over livestock producers who grow
under contract.) Another provision allows contract producers to discuss the contract
with family, advisors, and enforcement agencies even if the contract contains a
confidentiality clause (Sec. 10503).
Banning Packer Ownership of Livestock
Producers who face fewer marketing options and less competition for their⁵
livestock have expressed concern about captive supplies. They believe packers are
using captive supplies to manipulate market prices that are more favorable to packers,
and less favorable to producers. That is, as packers buy fewer animals on the spot
(open cash) market, reported prices no longer accurately reflect the preponderance
of prices paid for most livestock, they believe. Such producers believe this reduction
in price transparency works to their increasing disadvantage relative to packers.

⁴ U.S. Government Accounting Office. RCED-00-242: Packers and Stockyards Programs:
Actions Needed to Improve Investigations of Competitive Practices. September 2000.
⁵ There is no official definition for captive supplies, but the term generally refers to animals
committed to, or owned by, a packer more than 14 days prior to slaughter. See also CRS
Report RL31533, Livestock: A Proposed Ban on Ownership and Control by Packers.

Some producers have suggested that one remedy to captive supplies and the
perceived market manipulation is to ban packer ownership and control of livestock.
Supporters of a ban believe it would limit packers’ perceived ability to manipulate
the market, thereby improving farmers’ prices and access to livestock markets. These
producers and their supporters are concerned about the rapid pace of vertical
integration in the livestock industry, and believe that a ban could slow or stop it.
Opponents of a ban argue it would reverse many of the production efficiency gains
made by the livestock industry in recent years through closer packer-producer
alliances. At the least, they contend, it would create turmoil in the industry because
packers and producers would have to undo many relationships built over time.
In Congress. In the 107^th Congress, in response to calls from some producers,
the Senate-passed farm bill (S. 1731; H.R. 2646 as amended) contained a provision
(Johnson amendment) that would have prohibited packers from owning, feeding, or
controlling livestock for more than 14 days prior to slaughter. Livestock producer-
owned cooperatives and entities owned by such cooperatives, and producer-owned
packers that slaughter less than 2% of U.S. totals were exempted from the ban. The
provision was not included in the House-passed farm bill (H.R. 2646), and was not
included in the final legislation (P.L. 107-171).
The Senate Agriculture Committee held a hearing on banning packer ownership
on July 16, 2002, and the Senate Judiciary Committee held a field hearing on August
23, in South Dakota. The proposed packer ban might generate legislative interest in
the 108^th Congress.
Mandatory Price Reporting⁶
Mandatory price reporting (MPR) for large packers was incorporated by
conferees into the FY2000 USDA appropriations law (P.L. 106-78) after a long
period of intensive negotiations with meat packing companies and livestock
producers over the design of a comprehensive price reporting law acceptable to both
segments of the industry.
On April 2, 2001, USDA’s Agricultural Marketing Service (AMS) implemented
MPR. The new system replaced the previous voluntary reporting system that had
been in place for many years, and requires the reporting of market information by
meatpackers who slaughter an average of at least 125,000 cattle, 100,000 hogs, or

75,000 lambs per year and by importers with annual imports of 5,000 tons of lamb.

USDA in turn must publish frequent, detailed reports on these transactions. Market
news reports that are new under MPR include reports covering the prior day swine
market; forward contract and formula marketing arrangement cattle purchases;
packer-owned cattle and sheep information; sales and purchases of imported boxed
lamb cuts; and live lamb premiums and discounts.
On May 14, 2001, AMS discovered a technical error in the computer program
for MPR. The error affected the cutout values for beef carcasses and primals (the

⁶ For additional information, see CRS Report RS20079, Livestock Mandatory Price
Reporting, and AMS’ MPR site at: [http://www.ams.usda.gov/lsg/mncs/LS_MPR.htm].

major components of carcasses). USDA aggregates individual the prices of meat cuts
to construct a carcass value. Due to the programming error, the calculated carcass
values were incorrect. Individual meat cuts reported by packers were reported
accurately and were not subject to the programming error. On May 18, Agriculture
Secretary Veneman appointed a review team to evaluate measures in place to ensure
the integrity of information reported under MPR and to assess the economic impact
the misreported data may have had on livestock producers. As part of its activities,
the review team met with representatives of the livestock and meat packing
industries, Congress, AMS, and contractor officials. USDA announced on July 2,

2001, that it had begun to implement the changes recommended by the review team.⁷

Trade⁸
^U.S^.^{as P}^ercen^t^o^f^Wo^rl^d^M^a^rk^et^{Year 2001}
The United States is the
^50%world’s leading beef consumer,
^40%producer, and importer and the
second leading exporter. The
^30%United States is the third
leading pork consumer,
^20%producer, importer, and
exporter. The United States is
^10%the leading consumer and
^0%^P^r^oduc^tion^C^o^ns^um^ption^Ex^p^o^r^t^{s Imp}^o^r^t^sproducer of poultry meat anddominates the export market
^Beef^Po^rk^Po^ul^t^r^ywith 46% of total world
exports, while accounting for
less than 1% of total imports.
Russia (Poultry)⁹
Russia announced it was banning imports of U.S. poultry, effective March 10,
2002. Among Russia’s concerns were purported findings of salmonella on meat, the
legal use of chlorinated water in the processing of U.S. birds, and the feeding of
antibiotics. Speculation had existed that the Russian poultry ban came in response
to the new U.S. tariffs on imported steel. USDA, U.S. Trade Representative (USTR),
and Federal Drug Administration officials met with Russian officials and reached a
settlement on March 31, agreeing to lift the poultry ban on April 10. That deadline
was missed and the ban was lifted formally on April 15. Due to the new protocol
established by the agreement, Russian importers had to apply for new permits, which
effectively raised a de facto ban. On August 23, 2002, USDA announced the trade

⁷ The review team’s report is at: [http://www.usda.gov/oce/mp-report/index.htm].
⁸ CRS contacts: Charles Hanrahan 7-7235, and Geoff Becker 7-7287.
⁹ For more detailed information, see the USDA websites at:
[ h t t p : / / www.f s i s .usda.gov/ OFO/ e xpor t / Russi a.ht m]
[ h t t p : / / www.ams.usda.gov/ poul t r y/ gr adi n g/ ECP-Russi anFeder a t i on.pdf ] .

dispute was resolved and an agreement was reached on new veterinary certificates
that would allow imports of U.S. poultry. However, U.S. exporters were continuing
to encounter barriers to the Russian market as the year ended.
Europe (Beef)¹⁰
In a continuing dispute, the European Union (EU) banned (effective 1989) the
import of U.S. beef produced with hormones. In 1997, the World Trade
Organization (WTO) ruled in favor of the United States that the EU cannot ban,
without scientific justification, beef produced with hormones. The WTO authorized
U.S. retaliation of $117 million; the EU offered to compensate the United States by
enlarging the 20,000 ton quota for non-hormone treated beef in lieu of lifting the ban.
The United States, maintained that compensation, unless contingent on removing the
ban, was unacceptable, and no further resolution had been found by the end of 2002.
Country-of-Origin Labeling¹¹
Debate over the need for expanded country-of-origin labeling (COOL)
requirements for fresh meat and other raw agricultural products have attracted much
attention in recent years. One reason is that they are viewed by some as a way to help
U.S. producers dealing with low farm prices; proponents argue that consumers would
pay more for domestic products than for imports. Also, some perceive that food
products from certain countries might pose greater health risks; proponents contend
that additional labeling requirements would enable consumers to know the source of
retail food offerings and consider that information when selecting purchases.
Opponents counter that country-of-origin labeling bears no relation to food
safety and would not succeed in raising commodity prices paid to U.S. producers, as
proponents hope. They argue it would impose excessive and costly regulatory
burdens on retailers, processors, and farmers; undermine competitiveness; increase
consumer prices; be difficult to enforce; and—by imposing new non-tariff trade
barriers— undermine ongoing efforts to reduce other countries’ trade barriers and
expand international markets for U.S. products.
Farm Bill. After lengthy debate, Congress approved, as Title X, §10816, of the

2002 farm law, a requirement that many retailers provide, starting on September 30,

2004, COOL for perishable fruits and vegetables, peanuts, fresh and ground beef,

lamb, and pork, and farm-raised and wild fish/shellfish; the program is voluntary
until then. USDA published guidelines for the voluntary phase of COOL in the
September 11, 2002, Federal Register (67 FR 63367). (Dining-out establishments
are exempted from the new law). On November 21, 2002, USDA published a notice

¹⁰ See CRS Report RS20142, The European Union’s Ban on Hormone-Treated Meat, and
the Electronic Briefing Book U.S.-EU Meat Hormone Dispute, at:
[http://www.congress.gov/brbk/html/ebtra15.html]. USDA’s Foreign Agricultural Service
web site contains a primer on beef hormones at:
[http://www.fas.usda.gov/itp/policy/ hormone2.html ].
¹¹ See CRS Report 97-508, Country-of-Origin Labeling for Foods: Current Law and
Proposed Changes.

and request for public comment in the Federal Register (67 FR 70205), on the costs
of COOL during the voluntary phase of the program. Total costs for COOL record-
keeping (not only for meat but for all covered commodities) were estimated by
USDA at $1.968 billion, with $1 billion for producers, $340 million for food
handlers, and $628 million for food retailers. COOL supporters argued that the
estimate was inflated by the Department. COOL opponents countered that the
estimate illustrated the extent of the burden on the agricultural sector, suggesting that
the estimate might even be too low.
Environmental Issues¹²
In recent decades, the continued trend toward fewer but larger operations,
coupled with greater emphasis on more intensive production methods, have resulted
in more manure and other animal waste constituents within some production areas
where these larger livestock facilities are concentrated. One issue has been whether
all the waste is (or can be) handled in ways that minimize environmental problems.
A second issue has been what to do when the available land in some areas where
herds and flocks are concentrated is insufficient to assimilate all the manure and
other waste. Where the volume of wastes exceeds the land’s capacity, spreading it
on fields or storing it can lead to excessive chemical and nitrogen runoff into surface
or subsurface waters, and result in fish kills and other problems.
Animal feeding operations (AFOs) are facilities where animals are kept and
raised in confined situations; feed is brought to the animals. When large enough,
these facilities are designated as concentrated animal feeding operations (CAFOs)
and they become subject to regulatory requirements promulgated by EPA to prevent
water pollution. A CAFO generally is defined as having 1,000 animal units (AU),
a threshold that 11,200 operations exceed according to the most recent Census of¹³
Agriculture published data, collected in 1997. However, only about 4,500 of these
operations were covered by permits, according to EPA. EPA’s CAFO definition also
includes smaller facilities in certain physical settings; smaller CAFOs have either 300
to 999 AU, or fewer than 300 AU. EPA estimated that the number of CAFOs subject
to regulation will continue to grow rapidly and that about 15,500 operations will need
permits by 2006.

¹² CRS contacts: Jeff Zinn 7-7257, and Claudia Copeland 7-7227.
¹³ The equivalents for 1,000 animal units are: 1,000 cattle; 700 dairy cows; 2,500 hogs;
10,000 sheep; 125,000 broilers; 82,000 laying hens; and 55,000 turkeys. Under the permit
rules in effect until recently (see next page), a CAFO had to meet all the following criteria
to be subject to EPA rules:
–Animals are stabled or confined and fed for 45 days or more in a 12- month period;
–Vegetation is not sustained during the normal growing season on any portion of the lot or
facility (i.e., animals are not maintained in a pasture or on rangeland);
–Feedlots hold more than 1,000 animal units (or between 300 and 1,000 AU if pollutants are
discharged from a manmade conveyance or are discharged directly into waters passing over,
across, or through the facility). Also, animal feeding operations that include fewer than 300
AU may be designated as CAFOs if they pose a threat to water quality or use.

Under the federal Clean Water Act, CAFOs are regulated as point sources, in
a similar manner to industrial sources of pollution, and must obtain permits in order
to discharge pollutants into U.S. waters, under rules issued in the mid-1970s.
Environmental groups brought a suit in response to a lack of implementation that
culminated in a judicial consent decree in 1992, requiring final regulations to be
issued by December 15, 2002. On December 15, 2000, EPA under the Clinton
Administration had proposed a set of rules. EPA held eight public meetings across
the country to gather public comment on that proposal. The Bush Administration met
the court deadline by signing the final rule on December 16, 2002 (and publishing it
in the February 12, 2003, Federal Register).¹⁴
Under the final rule, all CAFOs must apply for a permit by December 2006,
from the state agency administering an authorized National Pollutant Discharge
Elimination System permit program in 45 states, or directly from EPA in the other
five states. EPA will be giving states considerable implementation flexibility.
However, it points out that the permitting requirements will be stricter than under the
old rule, and that the proposed rule will include several new controls on waste
discharges and land applications of waste.¹⁵ All CAFOs will be required to develop
and implement nutrient management plans, to carry out best management practices
under those plans, and to submit annual reports. Large CAFOs will have to keep
records for any manure transferred to another party. The rule will eliminate three
exemptions that excused CAFOs from permits under the prior rule if they discharged
only during large storms; if they raised chickens using dry manure handling systems;
or if they were excluded because they did not need to count immature swine and
immature dairy cows for purposes of this program.
EPA estimated that CAFOs produce about 220 billion gallons of manure
annually. EPA had predicted during the rulemaking process that the proposal would
reduce the volume of nitrogen released into the environment by more than 100
million pounds and phosphorous by more than 56 million pounds. In addition, over
2 billion pounds of sediment and nearly 1 million pounds of metals will not be
released, according to the EPA analysis. Compliance costs to CAFO operators were
estimated at $335 million annually; estimated annual benefits from the rule ranged
from $204 million to $355 million.
Farm groups generally were pleased that the final CAFO rule was more flexible
than earlier proposals, but continued to express concerns about implementation costs.
EPA’s press release pointed out that the rule does not include co-permitting
requirements, national ground water requirements, certification by recipients of
transferred manure, or mandatory requirements on when manure may be applied to
frozen, snow-covered, or saturated ground.
Environmental groups argued that greater regulation is warranted and
complained that the final rules will accomplish far less than the earlier proposals.
More specifically, they expressed concern about the lack of any minimum standards,
the wide range of flexibility for state administering agencies, the lack of updated

¹⁴ For more information on the final rule, see [www.epa.gov/npdes/caforule].
¹⁵ See CRS Report RL30437, Water Quality Initiatives and Agriculture.

technology standards, and the lack of public review of nutrient management plans for
individual farms. They concluded that large farms likely will be able to continue to
discharge wastes at unacceptable levels.
Meanwhile, to assist producers who will have to comply, some funding is
available from EPA, and also from USDA, the latter through the Environmental
Quality Incentives Program (EQIP; see below).
Farm Bill. The 2002 farm bill reauthorizes EQIP through FY2007, gradually
increasing funding from $200 million in FY2001 and $400 million in FY2002 to $1.3
billion in FY2007. It provides 60% of the funding each year to objectives related to
livestock production. It limits an individual’s or entity’s total payments over the
authorization period to a total of $450,000; provides incentive payments to producers
who develop Comprehensive Nutrient Management Plans; and requires that all
livestock producers who receive funding for animal waste systems have those plans.
In addition to the EQIP program, other conservation initiatives also may benefit
livestock producers. A new Conservation Security Program, enacted in the 2002
farm bill, was adopted to provide payments to all producers who install and maintain
specified conservation practices starting in FY2003. Three levels, or tiers, of
conservation and payments are specified (i.e., more extensive conservation efforts
would be eligible for higher levels of payments). Other new programs that may offer
new opportunities to some livestock producers include a grassland retirement
program, several water conservation initiatives, and smaller programs limited to¹⁶
certain regions or states.
Animal Health¹⁷
“Mad Cow” Disease¹⁸
“Mad cow” disease, or bovine spongiform encephalopathy (BSE), is a slowly
progressive, incurable disease affecting the central nervous system of cattle. It was
first diagnosed in Britain in 1986. U.S. federal and state agencies have found no BSE
in U.S. cattle since they began surveillance in 1989.
Scientific uncertainty about BSE’s cause and transmission led U.S. officials to
take several precautionary steps and to develop an emergency response plan to
implement if a case is found. USDA since 1989 has banned the import of all live
ruminants and most ruminant products from countries where BSE is known to exist.

¹⁶ See CRS Report RL31255, Resource Conservation Title: Comparison of Current Law
with Farm Bills Passed by the House and Senate.
¹⁷ CRS contact: Jean Rawson 7-7283.
¹⁸ See CRS Report RS20839, Mad Cow Disease: Agriculture Issues.

In 1991, USDA banned the importation of rendered by-products from ruminants.¹⁹
As of December 2000, the importation of all rendered animal protein products
(whether from ruminants or not) is prohibited. The Food and Drug Administration
(FDA), which regulates animal feed ingredients domestically, banned the feeding of
virtually all mammalian proteins to ruminants in August 1997.
However, an FDA survey in 2000 showed that full compliance has been difficult
to achieve. In January 2001, meat industry groups, including the National
Cattlemen’s Beef Association, the American Feed Industry Association, and the
American Meat Institute, issued a joint statement pledging a concerted effort to reach
100% compliance with the FDA ban on feeding mammalian proteins. A June 2001
FDA survey showed that 22% of renderers, feed mills, and other facilities that handle
ruminant material still were out of compliance with FDA’s labeling, record keeping,
and commingling requirements. Nonetheless, a study released November 30, 2001,
by the Harvard Center for Risk Analysis, states that USDA and the Department of
Health and Human Services had taken effective steps to prevent and prepare for
possible BSE introduction, although some improvements still could be made.
USDA’s Food Safety and Inspection Service (FSIS) requires its inspectors to
divert from processing any cattle showing suspicious clinical symptoms of BSE and
send their brains to an APHIS laboratory in Ames, Iowa, for testing. More than
11,000 cattle brains have been tested since 1990, and no BSE has been found. Under
FSIS’s foreign meat inspection program, no establishments in countries where BSE
has been found are approved to ship beef to the United States.
Humane Slaughter
Under provisions in the Federal Meat Inspection Act (21 U.S.C. 603(b), 610(b),
620(a)), FSIS inspectors are responsible for enforcing the Humane Slaughter Act (7
U.S.C. 1901-1906). This act requires that all livestock (but not poultry) be rendered
unconscious before slaughter. FSIS inspectors have the authority to stop slaughter
lines and order plant employees to take corrective actions to ensure compliance with
the act. Attempting to arouse public concerns about conditions in livestock slaughter
operations, animal rights organizations (primarily the Humane Farming Association
and affiliated groups), in recent years have bought large newspaper advertisements
claiming that packing plants routinely slaughter conscious animals. Formal
investigations by state authorities of the plants where the rights groups allege abuses
to have occurred have not substantiated these assertions. Relatedly, public awareness
has risen concerning the treatment of nonambulatory (“downer”) cattle at stockyards.
Farm Bill. The 2002 farm law contains a sense of Congress resolution calling
for full enforcement of the Humane Methods of Slaughter Act (Sec. 10305), and for
an investigation of the treatment of nonambulatory animals and gives the Secretary
authority to promulgate regulations if the findings warrant (Sec. 10815)

¹⁹ A ruminant is an animal with a stomach that has four compartments, and a more complex
digestive system than other mammals. Ruminants include cattle, sheep, goats, deer, bison,
elk, and camels. Swine, dogs, and humans are examples of nonruminants.