[Senate Hearing 114-644] [From the U.S. Government Publishing Office] S. Hrg. 114-644 A REVIEW OF THE U.S. LIVESTOCK AND POULTRY SECTORS: MARKETPLACE OPPORTUNITIES AND CHALLENGES ======================================================================= HEARING BEFORE THE COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY UNITED STATES SENATE ONE HUNDRED FOURTEENTH CONGRESS SECOND SESSION __________ MAY 26, 2016 __________ Printed for the use of the Committee on Agriculture, Nutrition, and Forestry [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Available via the World Wide Web: http://www.agriculture.senate.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 23-592 PDF WASHINGTON : 2018 ---------------------------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Publishing Office, http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). E-mail, [email protected]. COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY PAT ROBERTS, Kansas, Chairman THAD COCHRAN, Mississippi DEBBIE STABENOW, Michigan MITCH McCONNELL, Kentucky PATRICK J. LEAHY, Vermont JOHN BOOZMAN, Arkansas SHERROD BROWN, Ohio JOHN HOEVEN, North Dakota AMY KLOBUCHAR, Minnesota DAVID PERDUE, Georgia MICHAEL BENNET, Colorado JONI ERNST, Iowa KIRSTEN GILLIBRAND, New York THOM TILLIS, North Carolina JOE DONNELLY, Indiana BEN SASSE, Nebraska HEIDI HEITKAMP, North Dakota CHARLES GRASSLEY, Iowa ROBERT P. CASEY, Jr., Pennsylvania JOHN THUNE, South Dakota Joel T. Leftwich, Majority Staff Director Anne C. Hazlett, Majority Chief Counsel Jessica L. Williams, Chief Clerk Joseph A. Shultz, Minority Staff Director (ii) C O N T E N T S ---------- Page Hearing(s): A Review of the U.S. Livestock and Poultry Sectors: Marketplace Opportunities and Challenges................................... 1 ---------- Thursday, May 26, 2016 STATEMENTS PRESENTED BY SENATORS Roberts, Hon. Pat, U.S. Senator from the State of Kansas, Chairman, Committee on Agriculture, Nutrition, and Forestry.... 1 Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan... 2 Klobuchar, Hon. Amy, U.S. Senator from the State of Minnesota.... 4 Heitkamp, Hon. Heidi, U.S. Senator from the State of North Dakota 6 ---------- WITNESSES Brunner, Tracy, President, National Cattlemen's Beef Association, Cow Camp Feedyard, Inc., Ramona, KS............................ 7 Truex, Ronald, Chairman, United Egg Producers, Creighton Brothers, LLC, Atwood, IN...................................... 8 Hill, Howard, Past President, National Pork Producers Council, Breeze Hill Farms and H&K Enterprises, Cambridge, IA........... 10 Goggins, Joe, Producer, U.S. Cattlemen's Association, Vermilion Ranch Co., Public Auction Yards, & Northern Livestock Video Auction, Billings, MT.......................................... 12 Zimmerman, John, Producer, National Turkey Federation/Minnesota Turkey Growers Association, P&J Products, Northfield, MN....... 14 ---------- APPENDIX Prepared Statements: Leahy, Hon. Patrick J........................................ 42 Thune, Hon. John............................................. 45 Tillis, Hon. Thom............................................ 49 Brunner, Tracy............................................... 50 Goggins, Joe................................................. 57 Hill, Howard................................................. 64 Truex, Ronald................................................ 77 Zimmerman, John.............................................. 81 Document(s) Submitted for the Record: Roberts, Hon. Pat: Written letter to Hon. Tom Vilsack concerning rules proposed by Grain Inspection, Packers and Stockyards Administration (GIPSA), April 19, 2016.................................... 88 Written letter to Hon. Gene Dodaro concerning Foot-And-Mouth Disease (FMD), April 28, 2016.............................. 90 ``A Review of the U.S. Livestock and Poultry Sectors: Marketplace Opportunities and Challenges'', written testimony of Livestock Marketing Association (LMA)......... 92 Question and Answer: Brunner, Tracy: Written response to questions from Hon. Pat Roberts.......... 100 Written response to questions from Hon. Joni Ernst........... 101 Written response to questions from Hon. Thom Tillis.......... 101 Written response to questions from Hon. John Thune........... 103 Written response to questions from Hon. Patrick J. Leahy..... 103 Written response to questions from Hon. Robert Casey, Jr..... 107 Goggins, Joe: Written response to questions from Hon. Pat Roberts.......... 108 Written response to questions from Hon. Joni Ernst........... 108 Written response to questions from Hon. John Thune........... 109 Written response to questions from Hon. Patrick J. Leahy..... 111 Written response to questions from Hon. Robert Casey, Jr..... 114 Hill, Howard: Written response to questions from Hon. Pat Roberts.......... 116 Written response to questions from Hon. Thom Tillis.......... 116 Written response to questions from Hon. John Thune........... 119 Written response to questions from Hon. Patrick J. Leahy..... 120 Written response to questions from Hon. Robert Casey, Jr..... 125 Truex, Ronald: Written response to questions from Hon. Pat Roberts.......... 127 Written response to questions from Hon. John Thune........... 128 Written response to questions from Hon. Patrick J. Leahy..... 129 Written response to questions from Hon. Robert Casey, Jr..... 132 Zimmerman, John: Written response to questions from Hon. Pat Roberts.......... 135 Written response to questions from Hon. Thom Tillis.......... 136 Written response to questions from Hon. John Thune........... 137 Written response to questions from Hon. Patrick J. Leahy..... 138 Written response to questions from Hon. Robert Casey, Jr..... 142 A REVIEW OF THE U.S. LIVESTOCK AND POULTRY SECTORS: MARKETPLACE OPPORTUNITIES AND CHALLENGES ---------- Thursday, May 26, 2016 United States Senate, Committee on Agriculture, Nutrition, and Forestry, Washington, DC The committee met, pursuant to notice, at 10:03 a.m., in room 216, Hart Senate Office Building, Hon. Pat Roberts, Chairman of the Committee, presiding. Present or submitting a statement: Senators Roberts, Boozman, Hoeven, Ernst, Tillis, Sasse, Grassley, Thune, Stabenow, Brown, Klobuchar, Bennet, Gillibrand, Donnelly, Heitkamp, and Casey. STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF KANSAS, CHAIRMAN, U.S. COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY Chairman Roberts. Good morning. I call this meeting of the Senate Committee on Agriculture, Nutrition, and Forestry to order. We have a variety of farmers and ranchers from across the country here today to give us their perspectives on marketplace opportunities and challenges in the livestock and the poultry sectors. Who better to testify before this committee than producer leaders representing these industries that play such an important role in the economic stability of rural America and certainly in my home State of Kansas and in the state of every member that is privileged to serve on this committee. It has been five years since our last committee hearing on the state of the livestock and poultry sectors. Thank you to Senator Heitkamp for making this suggestion, and we agreed some time back that it was time. I know everyone is interested to hear about the many events that have taken place during this period that have impacted the economic standing of your industries as well as future opportunities and challenges for growth. Now, the livestock industry and the poultry sectors, weather ebbs and flows every day. One could argue that recent years have seen greater volatility and unpredictability than most. Today's livestock and poultry producers are operating in a highly cyclical marketplace. One year, they may receive record prices for their animals, and then the next see a dramatic drop in value, like we have seen recently in the beef sector. Other events, like the diseases that have ravaged the egg, pork, and turkey sectors, can leave our producers with little to no income for months on end. Unfortunately, we know there has been significant erosion in farm equity due to these disease outbreaks and marketplace volatility. Some producers were unable to weather that storm. Add into this equation the reality that this is an industry where the good times are typically composed of margins of just a few cents or a few dollars per animal and you begin to understand what a tough business animal agriculture is. This reality demonstrates just how savvy today's farmers and ranchers must be in order to make a living, and that this is a livelihood not for the risk averse or the faint of heart. Yet I am confident that even in the face of today's challenges, the industries represented here will continue to lead the world in delivering safe and affordable meat products to our consumers. The importance of this sector to my home State of Kansas is immense, not to mention the home states of everybody on the Committee. Eastern Kansas is known for its rolling Flint Hills, spotted with grazing cattle. Western Kansas is home to some of the country's largest and most modern beef feedlots. Kansas is the third largest beef producing state in the country, with deference to Texas and Nebraska. I hate to say that, really, but that is true. Senator Sasse. You are welcome. Senator Stabenow. Uh-oh. [Laughter.] Chairman Roberts. It is also experiencing growth in pork production, which is a boon to many of our small rural communities. These sectors present here today are a significant driver of our rural economies. In fact, according to the most recent USDA Agriculture Census, the beef, pork, and poultry sectors account for 36 percent of the total agriculture sales on an annual basis, and that number is only going up. Sales of cattle, hogs, poultry, and eggs also accounted for $141 billion annually. That is a billion with a ``B'', not an ``M.'' These are impressive numbers. Thank you for taking the time away from your farms and your ranches and your businesses to educate your elected officials about your industries. I ask unanimous consent to include in the record, testimony submitted by the Livestock Marketing Association. [The statement of the Livestock Marketing Association can be found on page 92 in the appendix.] Chairman Roberts. I now recognize the Ranking Member, the distinguished Ranking Member of our committee, Senator Stabenow. STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE OF MICHIGAN Senator Stabenow. Well, thank you very much, Mr. Chairman. This is a very important hearing and we welcome all of our witnesses and appreciate the chance to highlight a very important part of the agricultural economy. As we know, the last several years have been challenging, as the Chairman said, for livestock producers, and it is one of the reasons why the 2014 Farm Bill made many of the important investments that help support and bolster this important segment of American agriculture. In fact, one of the first uses of the 2014 Farm Bill was the activation of the livestock disaster programs, which have paid out more than $5.8 billion to date and helped producers across the country when they faced extreme weather conditions, like droughs, blizzards, and wildfires. The Farm Bill also expanded the voluntary conservation programs that give our farmers and ranchers the tools they need to address issues on their own instead of regulation. USDA voluntary conservation programs make it easier for a rancher in Kansas or a turkey producer in Michigan to improve wildlife habitat, livestock forage, and water quality through programs like the Environmental Quality Incentive Program or the Agricultural Conservation Easement Program. In addition, the new Regional Conservation Program provides opportunities for locally led conservation solutions to issues like improving water quality in our Great Lakes and addressing endangered species issues like the sage-grouse in the West. However, for USDA conservation efforts to be successful, I would ask today for your continued help to encourage more producers to take advantage of these opportunities and tell their story about why voluntary conservation is the best way to address resource concerns. As we look to other issues impacting our livestock industry, we know how important it is to make investments in agriculture research. In fact, this need was underscored by last year's rapid emergence of highly pathogenic avian influenza, which affected more than 48 million birds in 15 states, and we know what that meant. This type of animal health crisis has devastating economic impacts on our producers, drives up the cost of food for consumers, and threatens international trade. That is why the investments we made through the Farm Bill to establish the new Foundation for Food and Agriculture Research are so important, and I look forward to seeing the Foundation begin to roll out new programs shortly to support your efforts. Despite these challenges, however, there are also plenty of reasons for the livestock sector to be optimistic. As I look to my home State of Michigan, I see livestock producers breaking new ground on processing facilities, expanding into new value- added markets like organics. Just last summer, the Clemens Food Group broke ground in Coldwater, Michigan, on one of the first new Michigan pork processing facilities in decades. They are expected to create 800 jobs and will source from producers in Michigan and throughout the Midwest. Nationwide, the demand for organic eggs has more than doubled since 2012, and producers like the Herbruck's in Michigan have continued to step up to meet the need. Now is the critical time to ensure that we continue to support these organic producers so organic eggs can continue to be available and affordable for American families. Lastly, Mr. Chairman, I want to highlight action by this committee last year to unanimously pass and get signed into law a reauthorization of mandatory price reporting, which we did together. This authorization made important advances that were supported by producers to increase market transparency, and I am pleased we are able to do this in an overwhelmingly bipartisan way. Mr. Chairman, I appreciate you holding this hearing. Again, I stand ready to work with you and our colleagues on the Committee to ensure our farmers and ranchers have the tools they need to be successful. Thank you. Chairman Roberts. I thank the Senator. A study was just conducted a while back saying that members of the Senate are supposed to be in two or three places at the same time. [Laughter.] Chairman Roberts. That explains a lot. Senator Klobuchar is supposed to be at the Judiciary Committee. I note that Senator Grassley is supposed to be, as well. We have provided him a muffin and a cup of coffee, but he has not shown up---- Senator Sasse. Can I have his muffin? Chairman Roberts. --demonstrated by the distinguished Senator from Nebraska, who took time from reading from the Constitution to demonstrate that. I am going to get in trouble for that. [Laughter.] Chairman Roberts. Senator Klobuchar, I know that you want to introduce John Zimmerman, who is a turkey grower, on behalf of the National Turkey Foundation from Northfield, Minnesota. Why don't you proceed with that? STATEMENT OF HON. AMY KLOBUCHAR, U.S. SENATOR FROM THE STATE OF MINNESOTA Senator Klobuchar. All right. Well, thank you very much, Mr. Chairman and Ranking Member Stabenow, and also Senator Heitkamp for suggesting this hearing. I think it is so important, and the work that we have done in the Farm Bill on a bipartisan basis for our livestock and poultry industries has been key, but also there is a lot of work to be doing going forward and I am glad we are doing this. Minnesota is number one for turkeys. I just always like to say that. We are number one for turkeys, as Mr. Zimmerman knows, in the country, and number two for hogs, which sometimes surprises people. So, this is pretty important to us. John Zimmerman is a second generation Minnesota turkey farmer who also raises corn and soybeans on his farm with his wife, Cara, and son, Grant. He has previously served as President of the Minnesota Turkey Research and Promotion Council and he is a current board member of the National Turkey Federation. He is also the current Board Chair of the River Country Co-Op. He is a graduate of Iowa State University, which we will not hold against him, being from Minnesota, where he earned a Bachelor's Degree in animal science. Thank you for being here, John, and I know the Committee will benefit from the expertise that you will bring to a turkey farmer, and also as a turkey farmer, and also as an industry leader. We look forward to hearing from you. Chairman Roberts. I would like to now proceed with the introduction of the witnesses. I am very proud to introduce Mr. Tracy Brunner, President of the National Cattlemen's Beef Association. Mr. President, I am not going to go any farther with that. Tracy is a fourth generation rancher from Ramona, Kansas. He has served as President of his family corporation since its inception in 1988, where he manages the feed yard, the yearling grazing operation, cattle and grain marketing decisions, commodity risk management, and customer relations. He is a busy guy. Tracy's family also operates a seedstock enterprise, raising bulls and replacement heifers for many ranchers all throughout the United States. Tracy graduated from Kansas State University, home of the ever-optimistic Fighting Wildcats, with a degree in animal science and a Master's of agribusiness. He has held many leadership positions in the U.S. beef industry, including Executive Committee Member and President of the Kansas Livestock Association, a member of the Kansas Beef Council Executive Committee, a member of the Kansas Governor's Agriculture Advisory Board, as well as Policy Division Chair, Executive Committee Member, and Board member for the National Cattlemen's Beef Association for nearly 20 years. Tracy, you have been a true leader for our Kansas agriculture and the U.S. beef industry. I am very pleased, very proud to welcome you to the Committee today. [Pause.] Chairman Roberts. We will proceed with your statement in just a moment. We will introduce the rest of the witnesses. Ron Truex, who is Chairman of the United Egg Producers, Atwood, Indiana. Mr. Truex's career in the egg industry began over four decades ago when he joined Creighton Brothers, LLC, an egg production, processing, grading, and marketing company. Ron has held positions in sales and operations and has served as President and General Manager of Creighton Brothers since 1998. Ron has held several leadership positions within state and national agriculture organizations, including President of the Indiana State Poultry Association, President of the Indiana Egg Board, past Chairman of the American Egg Board, and as chairman of several committees within the United Egg Producers. Thank you so much for being here today Ron, I look forward to hearing your views of the egg industry. Senator Grassley was supposed to be here to introduce Dr. Howard Hill. He is obviously over at the Senate Judiciary Committee. Dr. Hill is the Past President of the National Pork Producers Council from Cambridge, Iowa. Dr. Hill is a pork producer and a veterinarian from Cambridge, Iowa, where he runs a farrow to finish hog operation, raises Angus cattle, and grows 2,700 acres of corn, soybeans, and alfalfa. Dr. Hill earned his Bachelor's and Doctorate of Veterinary Medicine degrees from the University of California-Davis and a Master's and Doctorate degree from Iowa State University in veterinary microbiology and preventive medicine. He has worked as a veterinary practitioner, a fellow for the National Institutes of Health, head of the Microbiological Section of the Iowa State University Vet Diagnostic Lab, head of veterinary services for Murphy Family farms, and Director of Production and Chief Operating Officer for Iowa Select Farms. Dr. Hill is the Past President of the National Pork Producers Council and the American Association of Swine Veterinarians, a former Board member for the Iowa Pork Producers Association, and was recently appointed to serve on the U.S. Department of Agriculture's Advisory Committee on Animal Health. Dr. Hill, that is quite a distinguished career. I look forward to your testimony. Senator Heitkamp, I recognize you to introduce Joe Goggins, a producer on behalf of U.S. Cattlemen's Association from Billings, Montana. STATEMENT OF HON. HEIDI HEITKAMP, U.S. SENATOR FROM THE STATE OF NORTH DAKOTA Senator Heitkamp. Welcome, Joe. Joe is a rancher and auctioneer from Billings, Montana. He is a native Montanan who, in addition to working on his family's ranch, has auctioneered for some of the top purebred sales in America and remains directly involved in his family's livestock auction market. He is the owner of J&L Livestock, which merchandises from 3,000 to 5,000 top bred commercial Angus females annually. His family's three livestock auction yards and Northern Livestock Video Auction is often cited as a primary influencer in the cash cattle market across the nation. We are proud to have him, because he is not only an active Montanan, he is also a regular at North Dakota's bull sales, most notably Ellingson Angus in St. Anthony, Frey Angus in Granville, Prairie Pride in Enderlin, Schaff Angus Valley at St. Anthony, and Stuber Ranch in Bowman, and we really appreciate your involvement in North Dakota, and I know that you know that we produce some of the best bulls in the world. His reach into the cattle industry extends nationwide with his family's widely subscribed publication The Western Ag Report. Continuing to be an active member in the livestock industry, he served one term as President of Montana's Livestock Marketing Association and two terms as President of Montana Angus Association. He is currently the Director of the Livestock Marketing Association and a member of the United States Cattlemen's Association. Joe remains very involved in the ebb and flow of the cattle market. With all of that on his plate, he and his family are still able to help market 600,000 head of cattle annually, along with his wife, Linda, and his three children and 250 employees who help him through that process. Quite a record of achievement. Welcome to the Committee. We look forward to your testimony. Chairman Roberts. Thank you, Senator Heitkamp. We thank you all again for taking the time to join us today. We appreciate your sharing your expertise, firsthand experience as leaders of the livestock and poultry sectors. Mr. Brunner, Tracy, could you tell me in your perspective how we get past this recent downfall in the beef sector. STATEMENT OF TRACY BRUNNER, PRESIDENT, NATIONAL CATTLEMEN'S BEEF ASSOCIATION, COW CAMP FEEDYARD, INC., RAMONA, KANSAS Mr. Brunner. Well, thank you, Mr. Chairman, members of the Committee. Good morning to everyone. Always at the mercy of Mother Nature, our industry is rapidly recovering from extensive drought. Herd rebuilding and expansion are taking place at a rate where U.S. cattle numbers will soon be equal to 2012. Additionally, American cattle producers continue to be more efficient in producing beef. Today, we can produce the same amount of beef that we produced in 1977 at one-third less cattle and land. The beef supply chain is always focused on the consumer. Our cow-calf ranchers tell their seedstock suppliers what they need and also ask their stocker and feeder calf buyers what they will pay the most for. Cattle feeders, likewise, look to packer processors for signs of greatest value, who in turn have an ear for retail and food service needs. Cattle prices have been a topic of focus for NCBA and our members. In early 2015, we saw record high cattle prices, but soon those started back down. One factor was the increase in overall protein supplies. Last year, U.S. per capita red meat and poultry supplies increased by nearly ten pounds per person. In addition, the strong U.S. dollar has impacted our ability to ship beef to our international customers. All of this additional supply puts downward pressure on our markets, but we are used to the ups and downs of the cattle cycle. In order to manage this cycle, we need risk management tools that work. We currently rely on market forums like CME Groups, cattle futures contracts, to add transparency to our price discovery process. Changing technologies and a transition to automated trading and commodity futures have increased market volatility, making interpretation of those price signals different than what we are accustomed to in the past. The integrity of our market forums is very important to us, for without futures contract integrity, our industry will abandon their use. We have recognized the volatility and are working directly with the CME Group to find ways to address it. We have a joint NCBA-CME working group which is analyzing potential changes, such as slowing down the market to help ensure a level playing field for producers who are using these tools to manage their price risk. Today, we ask for no direct action from our government in our cattle marketing systems and forums. In fact, I am concerned at some of the action that we have seen. Secretary Vilsack has announced he is going to dust off the proposed GIPSA marketing rule that resulted from language included in the 2008 Farm Bill. This is very concerning to us, because bipartisan efforts already resulted in appropriations language which defunded any additional work on or implementation of the ideas included in the draft rule. The proposed GIPSA rule would have made USDA the ultimate arbiter on how cattle are marketed. We urge USDA to enforce the Packers and Stockyards Act as it exists now. We do not need them dictating how we can or cannot market our cattle. We have worked for years to find ways, new and innovative ways to market cattle. Alternative marketing arrangements have been studied by USDA and independent groups and the results show that these alternative marketing arrangements benefit producers and consumers alike. Any Congressional or executive action to interfere will only add to our price problems, not solve them. Solving our price problems relies on addressing the true issues of consequence in our industry. We have capitalized on the growing demand for U.S. beef overseas, and Japan has become our leading export market. But Australia now has a ten percent tariff advantage over us, resulting in a loss of $300 million. The tariff advantage for Australia will continue to grow until we pass TPP. In closing, I would say you could also help our bottom line by easing the regulatory burden that our industry is under. Taking action to reform the Endangered Species Act and helping us keep the EPA at bay would go a long way in easing the pressures on our industry. Again, thank you very much for this opportunity to be with you. [The prepared statement of Mr. Brunner can be found on page 50 in the appendix.] Chairman Roberts. Thank you, Tracy, for a very good statement. Mr. Truex. STATEMENT OF RONALD TRUEX, CHAIRMAN, UNITED EGG PRODUCERS, AND PRESIDENT, CREIGHTON BROTHERS, LLC, ATWOOD, INDIANA Mr. Truex. Thank you, Mr. Chairman. My name is Ron Truex and I am an egg producer from Atwood, Indiana. I am also Chairman of United Egg Producers and we appreciate being invited to this hearing. I would like to talk about two major events that have had a dramatic impact on our industry in the past year. Then I would like to mention two current issues where we could use the Committee's help. The first event was last year's devastating outbreak of highly pathogenic avian influenza. I have some statistics in my written testimony, but I am sure I do not need to tell anyone on this committee what a difficult experience that was. Thankfully, my farm was not directly involved, but every single egg producer was affected one way or another, from much more stringent biosecurity to a loss in demand for egg products, which we hope is temporary. We are still dealing with the aftermath of the HPAI crisis. This year has brought another challenge. Our customers in food service, food manufacturing, and retail grocery sales are announcing their decisions to source only cage-free eggs in the future. In most cases, they have specified a transition period, often as much as ten years. There are about 300 million hens in the U.S. egg laying flock. Today, about 30 million of those, just under ten percent, are cage-free housing. Of those 30 million hens, just under half of those are on organic farms, with the remainder in non-organic production. The remaining 90 percent of the U.S. flock is cared for in cages, the vast majority of which comply with our UEP Certified Program, which provides space requirements for each hen. A small but important portion are kept in enriched cages, where space allowances are greater and enrichments like perches and nest boxes are provided. According to the estimates by USDA, if you add up the current egg usage of all companies that have publicly made cage-free commitments, by 2030, 60 percent of the nation's egg laying flock, not the current ten percent, but 60 percent, or 174 million birds, will need to be in cage-free housing. USDA also added up the number of egg producers that have publicly announced plans to convert some or all of their operations to cage-free status. However, those commitments only add up to 63 million hens, about a third of the 174 million requested by our customers. Our industry is highly competitive and we will always try to produce what our customers want, but it will be extremely difficult for us to meet the cage-free demand. The new construction, capital investment, additional land acquisition, and higher production costs will all be daunting. UEP believes, and science shows, that hens can be humanely housed in a variety of ways, through conventional cages, enriched cages, and in cage-free environments. Good management, not production technique, is the most important variable in hen welfare. Now, in the time I have left, let me conclude with two recommendations for Congressional action. Like most other farm groups, we are hoping for a national standard on GMO labeling that will override state laws. We appreciate the hard work that the leaders of this committee are continuing to do and we fully understand it is not an easy task. We would simply like to point out that while most of our hens consume genetically engineered feed, the corn and the soybeans, neither the hens nor the eggs they lay are genetically engineered. Therefore, eggs should not have to be labeled as GE or GMO merely because they were laid by hens that consumed GE feed. A second way that we hope Congress will help us is by encouraging USDA to carry out a better economic analysis before finalizing a new proposed rule on organic livestock and poultry production. For the egg sector, USDA is proposing to ban production systems that have been approved by that Department since 2002. These so-called porch systems provide outdoor access to hens on solid floor structures that are open to the air and the sunlight on the sides, but have roofs in order to keep out predators and avoid contact with wild birds, which are carriers of avian influenza. Our farm is not organic, but a number of our UEP members have entered organic production in recent years and this is a major issue for them. They believe the economic impact of this proposed regulation will be well in excess of $100 million and perhaps more. Besides banning porches, the proposed rule has an outdoor space requirement that will be impossible for many producers to meet without expensive new land purchases. It also requires that outdoor areas be at least 50 percent soil, which increases the possibility of contact with salmonella as well as animals that carry it, like rodents. If this rule is finalized, the supply of organic eggs for consumers will fall substantially and many producers will exit organic production. This committee's Chair, Ranking Member, and other members have already been very helpful in questioning USDA's factual basis for this rule and we hope you will continue asking questions, filing comments, and asking USDA for an extension of the comment period for at least an additional 60 days so the Department will have a better factual basis for the final rule. Egg producers appreciate this committee taking a strong interest in animal agriculture, and thank you for the opportunity to testify. [The prepared statement of Mr. Truex can be found on page 77 in the appendix.] Chairman Roberts. Dr. Hill, you are recognized next, but I want to just say something on behalf of the Ranking Member and myself on this latest rule with regards to chickens and this whole exercise we are talking about, the big yard and sort of an over-leverage. Senator Stabenow. Perches. Chairman Roberts. We have been talking--I think we might include a requirement that we play Mozart to just sort of calm the chickens down. I do not know if that would be helpful or not. [Laughter.] Chairman Roberts. On this comment period, I sure hope you are standing up, and I know we are, to make sure that the Department hears that this is just--sometimes it is hard to understand what happens in our federal government. This is one of those cases. So, thank you for your comments on that, and all of us are working to solve the GMO problem. I did not mean to interrupt the flow of the witnesses here, but thank you for those comments. Dr. Hill. STATEMENT OF HOWARD HILL, D.V.M., PAST PRESIDENT, NATIONAL PORK PRODUCERS COUNCIL, BREEZE HILL FARMS AND H&K ENTERPRISES, CAMBRIDGE, IOWA Dr. Hill. Good morning, Chairman Roberts, Ranking Member Stabenow, and members of the Committee, and thank you for this opportunity to visit with you. I am Dr. Howard Hill, a veterinarian and pork producer from Cambridge, Iowa, and Past President of the National Pork Producers Council. The U.S. pork industry is in pretty good shape right now economically. In the past couple of years, it has overcome some disease issues and weather-related record-high feed grain prices and now appears to be moving into a period of cautious calculated expansion. Pork production is forecast by USDA to increase this year by two percent, to almost 25 billion pounds, and in 2017 by 2.6 percent, to more than 25.5 billion pounds. Of course, producers' fortunes can be affected for good or bad by any number of factors, some controllable and some not so controllable, such as disease and weather. I am going to first address an opportunity that would be very positive for hog farmers like me and that Congress can control, the Trans-Pacific Partnership, or TPP. But another issue recently has come up that if not addressed would wipe out any of the benefits we gain from TPP. Pork producers are very concerned about the so-called GIPSA rule, which you have heard about from Mr. Brunner. As many of you know, the rule was borne out of the 2008 Farm Bill, which includes five specific issues, mostly related to the poultry industry, but Congress wanted USDA to address. But the Grain Inspection, Packers, and Stockyard Administration in 2010 proposed an expansive rule that would have had a significant negative impact on the livestock industry. In November 2010, an Informa Economics study of the rule found it would have cost the pork industry more than $350 million annually. Tens of thousands of comments, including 16,000 from the pork producers, were filed in opposition to the rule, and Congress several times included riders in the USDA's annual appropriation bill to prevent it from finalizing the regulation. Such an amendment was not included in the USDA's fiscal year 2016 bill. Now, the agency is moving forward with the rule and we have grave concern it will mirror the 2010 proposal. If it does, the livestock industry would be fundamentally and negatively changed and the increased exports and jobs created from TPP will be negated. Additionally, the fact that we have to deal with the GIPSA rule issue is diverting valuable resources away from the pork industry's top priority, and that being the approval of TPP. TPP, the benefits of which will exceed all past Free Trade Agreements, represents a great opportunity for U.S. pork producers and for the entire U.S. economy. TPP includes the United States and 11 Pacific Rim countries, and those nations include nearly a half-a-billion consumers and represents 40 percent of the world's GDP. The agreement has become the de facto global trade vehicle and other countries in the region already are lining up to be part of TPP. Because other Asia- Pacific trade agreements are being negotiated, such as China- led 16-nation regional comprehensive economic partnership, the United States cannot afford either to economically or geopolitically walk away from the fastest growing region in the world. To give you an idea of the importance of Free Trade Agreement to the U.S. pork producers, the United States now exports more pork to the 20 countries with which we have an FTA than it does to the rest of the world combined. Congress must pass TPA and it must do so soon. Finally, a challenge that would be out of everyone's control but that could be tempered through preparedness is a foreign animal disease outbreak, specifically an outbreak of Foot and Mouth Disease. A foot and mouth outbreak in this country would be economically devastating to the pork producers and other food producers. USDA and the livestock industry has been working on a plan to combat an outbreak, but the only practical way is through the use of vaccination. Unfortunately, we currently do not have the ability to produce the number of doses needed for an initial outbreak or the capacity to produce more vaccine. The U.S. pork industry believes, consistent with Homeland Security Presidential Directive 9, that an adequate Foot and Mouth Disease vaccine bank must be established. This would require, one, an offshore vendor maintained bank that would have available antigen concentrate to produce against all 23 of the most common Foot and Mouth Disease types currently circulating in the world. Two, a vendor managed inventory of ten million doses, which is the estimated need for the first two weeks of the outbreak. Third, a contract with an international manufacturer or manufacturers for the surge capacity to produce at least 40 million additional doses. Given the costs of dealing with a Foot and Mouth Disease outbreak and the economic impact on the livestock industry and, indeed, on the entire U.S. economy, Congress should appropriate enough money to set up such a vaccine bank. Those are a few of the opportunities and challenges pork producers face and I will be happy to answer any questions at the appropriate time. Thank you. [The prepared statement of Dr. Hill can be found on page 64 in the appendix.] Chairman Roberts. Thank you, sir. Mr. Goggins. STATEMENT OF JOE GOGGINS, PRODUCER, U.S. CATTLEMEN'S ASSOCIATION, AND VICE PRESIDENT, VERMILLION RANCH COMPANY, PUBLIC AUCTION YARDS, BILLINGS LIVESTOCK COMMISSION COMPANY, WESTERN LIVESTOCK AUCTION, AND NORTHERN LIVESTOCK VIDEO AUCTION, BILLINGS, MONTANA Mr. Goggins. Good morning. It is truly an honor to be here on behalf of the livestock industry addressing this distinguished committee and the great people you represent. In the next 15 to 20 years, when you look at the massive population growth not only in this country but worldwide, the deal maker for the United States of America when it comes to trade with our world partners will not be our technology or our energy, it will be our food. The American producer, feeder, and packer have the know- how, work ethic, and pride to produce the highest quality, most affordable, and safest protein in the world. This is why we must demand that we in America do everything in our power to keep an open, fair, competitive marketplace for our producers and feeders of all sizes. Another key component is to assure our domestic livestock herd remains safe and free from both domestic and foreign diseases. There have been many success stories in the previous Farm Bill programs, for example, the voluntary conservation effort that kept the sage-grouse from being listed, the beginning farmers and ranchers program, the disaster funding program that aided the producers in the Dakotas after the Atlas blizzards of 2013, just to name a few. In the years 2013 and 2014, we all saw our once-in-a- lifetime up in the cattle market. Since then, in the last year, I hope we have seen our once-in-a-lifetime down. The last year represents the largest loss in equity in the history of the U.S. cattle industry. Following are some concerns and challenges that need to be looked at and addressed by this committee. We need to find a fairer and more competitive way of determining a weekly cash price on live fed cattle. There are many avenues by which to do this, but we undoubtedly need to create more transparency and competitiveness at the fed cattle level. Volatility in the marketplace is causing huge problems for everyone in the industry. The Futures Board has always been a very good tool for producers and feeders to manage risk. At the present time, it no longer can be used because of violent moves in the market, mostly due to, in my opinion, the expanded limits, and high frequency algorithmic trading. It is a speculator's market. For example, just two weeks ago, we sold fed cattle at a $134 to $136. The Board the same morning went near limit down on the front month June to $121-something. That is a $15 basis Now, that is proof fundamentals do not have much to do with this market. However, my biggest concern about the volatility in this market is how it affects the average producer and young producers that have to borrow most of their money from the bank to purchase and feed these cattle. The lenders, in turn, are almost 100 percent of the time requiring these people to hedge 75 percent of those cattle they buy in order to acquire such a loan. These massive, violent moves on the Futures Board cause people to pay huge margin calls, which drains their available cash, forcing them to get out of the hedge at a very unfavorable position. I know in our own family feeding operation, currently, we background and feed near 50,000 head of calves a year. The Futures Board is no longer a viable tool for us due to the volatility of the market and the amount of money it takes to hold a position. This may allow us only to feed half as many cattle going forward. We need to modernize and update the Packers and Stockyards Act of 1921. This 95-year-old Act needs to be modernized. Another challenge I would encourage the Committee to be conscientious of is the concerns that come with over- regulation. Too much government on the farm and ranch is a major concern in the country. One example is the uncertainty surrounding the EPA's Waters of the U.S. rule. I would also suggest caution on making too stringent requirements on the trucking and interstate movement of livestock. Livestock are a highly perishable commodity. If we hamper the ability to move livestock quickly and efficiently, we might actually limit opportunities for producers in parts of this country. In closing, as a producer of protein, I challenge this committee to address the concerns and issues I have just laid out. Restructure restrictive laws. Update outdated laws. Ensure that we have some transparency and competitiveness in our industry. Last but not least, put some sideboards on the futures market and the influence the Board has on the cattle market. Keep in mind, in the years to come, trade policies and currency values will heavily play on our markets and the nations with the capabilities to produce an abundant quality, high quality safe and affordable food supply will be the powerhouses in the global economy. [The prepared statement of Mr. Goggins can be found on page 57 in the appendix.] Chairman Roberts. We thank you, Mr. Goggins. Thank you for the challenge. We accept it. I would just note that I have been to 18 Kansas counties here recently. I was way out there in Western Kansas, in St. Francis, and a good friend of mine who I have known a long time put on a cowboy hat like Tracy has there, pulled it down, and said, ``Pat, you have done a good job, but I have got news for you. I am done.'' He just said, ``I feel ruled. I do not feel governed.'' I think that pretty well sums up some of the concerns that you raised. Those of us who serve on this committee in a bipartisan fashion want to address all of these concerns, and I thank you for pretty well summing them up. Mr. Zimmerman. STATEMENT OF JOHN ZIMMERMAN, PRODUCER, NATIONAL TURKEY FEDERATION/MINNESOTA TURKEY GROWERS ASSOCIATION, P&J PRODUCTS, NORTHFIELD, MINNESOTA Mr. Zimmerman. Good morning, Chairman Roberts, Ranking Member Stabenow, and members of the Committee. I appreciate the opportunity to testify on behalf of the 63,000 men and women who put their boots on every day to keep the turkey industry working. Our industry raises approximately 238 million pounds of turkey annually, and USDA's latest forecast puts 2016 turkey production at an all-time record of 6.4 billion pounds, 14 percent above 2015. This year, the turkey industry has made significant strides and learned a lot in recovering from high path avian influenza after suffering through the worst animal disease outbreak in U.S. history last year. However, our preparation was tested earlier this year in Indiana when a small outbreak occurred in a commercial turkey flock. This outbreak was small precisely because of the lessons we have learned. The important lesson is that immediate action needs to be taken at the local level to limit virus spread. No matter how good the intentions are at the state and federal level, industry must be given clear permission to act within minutes, not hours or days, to protect other nearby farms from becoming infected. I must emphasize the need for rapid stamping out procedures and methods that ensure humane treatment while eliminating virus spread. Currently, there is no one method that achieves perfect results in all circumstances. NTF is deeply appreciative of the indemnification program implemented by USDA/APHIS, strongly supported by Congress, that helped us manage through this crisis, and I would be remiss if I did not take a moment to personally thank my fellow Minnesotan, Senator Klobuchar, on behalf of myself, the NTF, and the entire turkey industry for all you did to help us last year. Thank you. Finally, the billion dollars in losses are well documented. In order to prevent future outbreaks, the U.S. needs to adopt a forward looking mandatory animal pest and disease prevention program designed to limit the impacts of foreign zoonotic diseases on livestock and poultry producers, and we look forward to working with Congress to get this accomplished. All poultry exports were severely damaged by the trade restrictions that resulted from the 2015 outbreak. Specifically, last year's turkey exports declined 34 percent and over 33 countries enacted some form of ban on U.S. poultry. Without the hard work of APHIS, it could have been a lot worse. They reopened closed markets as well as continue to establish protocols that will limit bans to regional levels in the future. We also continue to see high path outbreaks in Europe, Asia, and South America, and now is the time to reengage with our trade partners to discuss how HPAI can be treated moving forward. This is a global disease, and working with the government, we can develop a plan that minimizes export disruptions now. With regard to non-scientific trade barriers, it is important that USDA's FAS continue to work with both APHIS and the turkey industry to fully understand how we differ from chicken and livestock production. For example, while never covered under U.S. COOL regulations, turkey has now been subjected to COOL-like regulations by both Korea and South Africa, who banned U.S. turkey raised and processed in the U.S. just because it was hatched in Canada. This is not science- based and is a problem for many companies that hope to expand sales into these promising growth markets. Finally, we support TPP as an important step forward in reducing trade barriers and opening new markets for the turkey industry and we encourage Congress to approve this agreement as soon as possible. Recently, USDA proposed a rule to amend the organic livestock and poultry production requirements based on recommendations by the National Organic Standards Board. NTF is concerned about the potential disruption to existing organic producers and their supply chains as well as the impacts this proposed rule may have on ensuring animal health. Before moving forward with the rule, the turkey industry feels that USDA should conduct a thorough assessment of the costs of compliance, increased animal health and welfare risks, and alternatives for existing organic growers, producers, and supply chains to ensure minimal impact. Six years ago, USDA proposed sweeping rule changes on farmer contracting. With the expiration of a Congressional prohibition on implementing these changes, USDA is once again threatening to fundamentally change the rules by which our members operate. We believe that the changes would increase costs, reduce productivity, and possibly lead to increased live production ownership by integrated poultry companies to the detriment of independent farmers. We support the continued prohibition of USDA's implementation of these proposed changes. A recent report by the National Academy of Sciences found that foods made from genetically engineered crops are as safe to eat as those made from conventional crops. Regarding food labeling, NTF actively supports two critical components of any GMO bill. One, that the bill maintains federal preemption for meat and poultry labeling, which is already regulated by USDA/ FSIS, and two, that it ensures that animals fed GE feed should not have to be labeled GE. We look forward to a bill that prevents a patchwork of state rules that create a labeling nightmare for food producers, but these two conditions must be met. Finally, we have a worker shortage all across this country and meat and poultry producers are no different in feeling the pain of this shortage. The turkey industry supports immigration reform that addresses the needs of year-round meat and poultry producers and processors. Our members need access to a pool of legal general labor immigrant workers and a visa program that can address these needs. However politically difficult it seems, we must get this job done. Once again, thank you for the opportunity to testify today on behalf of the U.S. turkey industry and I would be happy to answer any questions. [The prepared statement of Mr. Zimmerman can be found on page 81 in the appendix.] Chairman Roberts. We thank you all for taking the time to join us today and appreciate your sharing your expertise, your first-hand experience as leaders within the livestock and poultry sectors. Tracy, tell me, in your perspective, what is the best thing we can do to get this recent downfall in the beef sector addressed? Mr. Brunner. Well, Mr. Chairman, the current situation, as I have said, is one of growing supplies and we need growing markets, growing market access for our beef to match. Trans- Pacific Partnership is the trade agreement of the day. As was said earlier, 40 percent of the world's economy. It will level the playing field. Currently, we are paying 11 percent higher tariff going in to our best customer, Japan, $300 million loss already, and that is only going to continue to grow until we pass TPP. Then, very briefly, the increasing regulatory burden from EPA, Endangered Species Act, and other government agencies. Chairman Roberts. I would also like to hear your perspective on what you have already brought up, along with many of the witnesses here, on the real world impacts of the proposed GIPSA rule. I have sent a letter to the Secretary, I think it has been about a month ago. Maybe the letter was too, a little too much for him to take, but anyway, we have not gotten a reply back. In the House, they have taken action on the GIPSA rule and I would expect the same effort when we consider agriculture appropriations on this side. But, I have heard value-added programs stand to face a lot of legal threat due to the premiums they pay to producers potentially being considered as unfair. In your business, do you utilize any unique or niche marketing that you think could be jeopardized by the implementation of the GIPSA rule, or do you have other examples like this that you could share? Mr. Brunner. Mr. Chairman, the GIPSA rule as it was written into the 2008 Farm Bill would have severely restricted our ability to participate in alternative marketing arrangements. As I had said earlier, research has shown that those alternative marketing arrangements, value-based marketing, if you will, has encouraged our industry and allowed individual producers to meet and be rewarded for consumer demand. As a very brief example, our family actively participates in marketing most of our cattle through a value-based marketing system. Over time, this has allowed us to not only meet consumer demand by developing and producing products that consumers want and are willing to pay for, but also receive an average of $50 a head premium to the cash market. Chairman Roberts. Dr. Hill, can you describe in a little more detail some of the recent outbreaks of FMD that have occurred in other countries, how your industry and the Department came to the conclusion that the best way of addressing an FMD outbreak here in the United States is to vaccinate animals rather than trying to stamp out the disease. Dr. Hill. Two of the most notable outbreaks have been the recent outbreak in Korea and then several years ago the outbreak that was in Great Britain. In the past, APHIS has used the approach of destroying animals and disposing of the carcasses, and if you look at the recent outbreak of high path AI, that was one of the big challenges, was how they got rid of the carcasses. So, working with APHIS, the industry has come to the conclusion that slaughtering these animals, killing these animals and burying them or burning them or however you dispose of them is not practical. We have about a million pigs on the road in the United States every day and about 400,000 cattle. If we have an outbreak of Foot and Mouth Disease, we do not think it is going to be an isolated, small outbreak. Chairman Roberts. No, it will not. Dr. Hill. So, the only really practical way to try to control the disease is to have available vaccines. Fortunately, this is a disease that does not affect the humans, so the meat is usable, and if we had a vaccine bank available, we could have an aggressive vaccine program and try to limit the losses to producers and basically live for another day. Chairman Roberts. I thank you for that. I had a little experience with that as Chairman of the Intelligence Committee when we were discussing agroterrorism. Not many people wanted to hear about that. We had an exercise exactly as you have described. Acting as President at that particular time--there was not anybody else in town--but in doing that exercise, all hell broke loose and all of our exports stopped. Then we faced the dilemma of what to do with the diseased animals. I am not going to go into the rest of it. It just turned into an absolute disaster. But one thing happened. People discovered that their food did not come from grocery stores and there was panic everywhere. It shows you just how important this research is. I am over time here. I will get back to some of the rest of you later. Senator Stabenow. Senator Stabenow. Well, thank you very much, Mr. Chairman, and welcome again. We appreciate your testimony. Let me start with Mr. Truex. I wonder if you might speak a little bit more about what you talked about in your testimony in terms of the organic livestock standards rule, and if you could share some of the additional potential costs and impacts beyond purchasing additional land. When we look at those issues, I know that the producers most impacted are those that are actually producing 70, 80 percent of the organic eggs, and do you think there will be a sufficient number of new egg producers transitioning into organics to meet the rising demand? Mr. Truex. Thank you. I do not. What we are concerned about is that, as you said earlier, a large majority of the organic production is relatively new. The facilities are new because of the great increase in organic consumption in the past few years. So, the producers have a significant investment in relatively new facilities that was totally accepted by USDA until this proposed rule. So, they are going to be faced with a lot of changes. The other thing that we are concerned about is this rule that protects the birds from rodents and birds and all the other things, our current practice supports the FDA Egg Safety Rule, and we have concerns that if you put the birds out on the ground, let them out where they can get access to other birds and rodents, it is going to be a real challenge to protect those birds. In addition to that, you have the thought that, well, if there is an avian influenza problem, we will just put them back inside, but unfortunately, as we learned in Indiana this spring, sometimes you do not know you have avian influenza until the second day and then it is too late. So, if you take that in, all those things and add it together with the problems in local permitting and building and cost, our members are telling me, and, of course, I am not in organic production. In a commercial for your state, I buy my organic eggs from Herbrucks---- Senator Stabenow. Great. Mr. Truex. But, the problem is, to maintain the production you have, will be impossible with the added space. So even the producers that are in organic are going to have to build additional buildings and get additional land, and I think it is going to be very challenging for the others that are not currently doing it to get the funding and the land purchases and the buildings and the permits to build that. So, I believe we would limit the amount of organic eggs for the consumer. Senator Stabenow. Thank you very much. Dr. Hill, the Iowa Pork Producers Association is a leading member, I know, of the Iowa Ag Water Alliance, and working with the Iowa Corn Growers and Soybean Association, you are working to improve farm conservation and water quality through the locally led efforts that we have put together. I wonder if you could explain how the Iowa Pork Producers and Iowa Ag Water Alliance have worked with other partners using the new Regional Conservation Partnership Program to further your water quality goals. Dr. Hill. Yes. Well, thank you. The Iowa Pork Producers, of course, have worked closely with that group and also with the Department of Agriculture. There are state funds that help producers with some technologies, like cover crops. In my area, five, six years ago, we saw very few farmers using cover crops. Today, it has just had an exponential growth. Some of that is partially supported by government funds, but most of it is, I believe, just producers trying to do the right thing, especially on highly sensitive soil. If there is an ask, I would say the ask would be for more funding for research to develop new technologies, different technologies, maybe things that we are not doing today that we had not thought about. I think there is a big need to--you are not going to solve the water quality thing with one technology. Cover crops is not going to do everything we want it to do. So, added funding for research, I think, is very, very important, and we appreciate the support you have given us so far. Senator Stabenow. Well, thank you, and I hope we are going to be able to see more producers get involved in these efforts. I think that is very, very important. Finally, let me ask, for everyone on the panel, and maybe I will start--Dr. Hill, you are a veterinarian, I understand---- Dr. Hill. Yes. Senator Stabenow. --so let me start with you, as well, again. The FDA has taken several steps, as we know, like the Veterinary Feed Directive that goes into effect in December, to ensure that antibiotics are used judiciously and only when appropriate for animal health. This is going to require more regular relationships between veterinarians and producers and this is an area I have worked a lot in, supporting efforts to get more people into veterinary medicine. When you look at this, large producers may very well have veterinarians on their staff. I am concerned about smaller cow- calf producers or people in remote areas and so on. So, when we look at--earlier this month, the USDA announced $2.4 million available through a new Veterinary Services Grant Program that I authored in the last Farm Bill to support veterinarians in underserved areas, and Senator Crapo and I have just introduced another bill, a Veterinary Medicine Loan Repayment Program, to provide even more incentives. But, I am wondering what you think. I mean, what is happening here? I continue to hear concerns about not enough veterinarians to serve the need, and what more should we be doing to help with that? Dr. Hill. Yes. Well, first of all, our industry has fully supported 209 and 213 and producers have already, for the most part, reduced or eliminated feed additives that are of medical importance from the diets. The concern you have is a real concern, not necessarily in Iowa, where I am, because we have a lot of veterinarians. Your concern is valid in more remote areas, particularly, I think, in the cattle industry out West. I think any support that you can give for veterinarians working in these under-supply areas would be very, very important. We work closely, though, to get some of the things with the Feed Directives in place, like electronic rather than hand- written things. So, there are some ways that we have, working with the government officials, that we expedited the process that will make it easier. But I think there are still some challenges. The groups that are working on this on the pork side are the American Association of Swine Veterinarians, the National Pork Board and NPPC all working together to try to help producers. There is a lot of education going on right now about what to expect and be ready for January 2017. Senator Stabenow. I do not know, Mr. Chairman, if I might just ask--Mr. Brunner. Mr. Brunner. Yes. I just might briefly add, our organization worked hand-in-hand with FDA in the formulation of the Veterinary Feed Directive to try and make it as workable as possible for the cattle and beef industry. I would also like to point out that our even larger concern is with the jeopardy that is being placed on some very important technologies that are classified as antibiotics but are not--have no application in human medicine, specifically ionophores. Ionophores are very important to increasing the efficiency in beef production, but they have been classed as antibiotics. We are working with FDA to get clearer interpretation on that, as well. Then I might summarize by saying that it seems that over time, an increasingly higher share or percent of veterinarians seem to be going into companion animal practice versus large animal practice and a more robust and growing animal agriculture should show more opportunity for veterinarians there, as well. Senator Stabenow. Thank you. Thank you, Mr. Chairman. Chairman Roberts. Senator Grassley. Senator Grassley. Thank you, Mr. Chairman. It is very important that you have a hearing like this. A big industry, agriculture, it is very important. So, I would first welcome my fellow Iowan, Howard Hill. He has been involved with the pork industry probably most of your life. Dr. Hill, in your testimony, you mentioned the Waters of the U.S. rule, that is a major concern to the pork industry. It is also a major concern to most every agricultural group in Iowa and every agricultural organization. Could you share with the Committee a few examples of just common practice within your industry that you--where there is uncertainty regarding the Waters of the U.S. rule. Dr. Hill. Thank you, Senator Grassley. We do have a lot of concern about it. You know, the swine industry and the cattle industry is highly regulated with state requirements with manure application. The way we interpret what the EPA is proposing, it would impact severely how we would be applying manure. It, depending on how far they go, it could impact crop production just because of waterways that we use, setbacks. So, in our opinion, it is an overreach by EPA that we would strongly oppose. Senator Grassley. Mr. Brunner, I have a question for you, because I have heard from numerous Iowans about what has been going on in the beef market, and some of these people in Iowa would blame industry structure. Others would blame futures contracts. In your testimony, you state that only five or six percent of cattle are owned by packers. In addition, we know that nationally, only about 21.3 percent of the cattle are traded in the cash market, according to USDA data. The percent of cattle traded in the cash market has dropped significantly since 2005, when 52 percent were traded cash. While cash traded cattle have dropped 30 percent since that 2005, the formula based sales with packers are up 23 percent. Do you have any concern that the drop in the amount of cash traded cattle has contributed to that contract being more volatile, since it is less liquid and represents such a small percentage of the overall cattle market today? Mr. Brunner. Well, thank you, Senator. The increased volatility in the futures market, we believe, comes from the advent of and administration of new technology, high frequency trading. As I said before, our organization is working directly with the CME Group, trying to identify possibilities of dampening the effects of the high frequency trading on the cattle market. You know, you cannot deny the application of an emerging technology. Technology will go on regardless and practices will move beyond borders. So, we have to be cognizant that we cannot stop progress. What we do believe is that we need some data. We need to have information from CME. We have asked them to share data and information with us the effects of high frequency trading and are working to get that information so that we can better work with them on what changes might need to be made in the cattle contract. Senator Grassley. Okay. That is my last question, but I have a minute left. Let me take a couple seconds for summation. In the cattle market today, only 21 percent of the market is traded on the cash market, even though the price discovery from that 21 percent is utilized for nearly 60 percent of the cattle that are marketed through formulas. So, to me, it seems like the cattle market has experienced a structural change over the last decade where the tail wagging the dog situation has developed. So, I will continue, Mr. Chairman, to watch this situation. I have heard a great deal from cattle producers in Iowa about the current structure of the beef industry. Thank you, Mr. Chairman. I yield. Chairman Roberts. I thank the Senator. With apologies to Senator Klobuchar, it is your time---- Senator Klobuchar. Okay. Chairman Roberts. --but on WOTUS, I think everywhere we go in farm country, whether it be Kansas or wherever we are, the number one issue that comes up, Waters of the U.S. I am talking about dry creek beds and farm ponds where no self-respecting duck would ever land, and it goes on and on. I remember the meeting that we had with the Administrator of EPA, Gina McCarthy. There were two pages in this bill where it said normal farming operations are exempt. Then it had parentheses and it said, see regs, and then there were 88 pages of regulations, probably eight-point. You can hardly read it without a magnifying glass. I defy anybody in this room, any of you, any of us, any farm organization and any commodity group, any CPA, any lawyer, to define what the heck was in those regs. We were not successful in the Senate with what we thought was an answer to it. We have not given up and we will continue that effort. It is before the courts. But, it is the number one issue that has been brought up all throughout farm country. We are very cognizant of this and we are trying very hard to find an answer. Senator Klobuchar. Senator Klobuchar. Thank you very much, Mr. Chairman. I was proud to introduce Mr. Zimmerman earlier, and I guess I will address my first questions to you and Dr. Hill, and it is about the importance of investment in animal health research. We have seen some issues with our turkeys. You brought up the scourge, the health scourge that we had where so many producers were hit. But, Mr. Hill, you spoke about the need for more investment in the vaccine bank. Can you elaborate on how the industry has worked with APHIS to address this need and how APHIS has--and if APHIS has engaged at all with the Department of Homeland Security, as you suggested in your testimony? Dr. Hill. Well, I believe APHIS has engaged. Right now, the amount of money that is in this bank is a drop in the bucket compared to what is really needed. Dr. Roth at Iowa State University has done extensive studies on what would happen in an outbreak and how much vaccine we would need. The current bank of, not vaccine, but of the virus that would make the vaccine, is held at Plum Island. There are 23 strains that circulate in the world, and I think Plum Island has about 14 of those available. What would happen is, because we cannot have a live virus in the United States, there is a contract to ship that to Europe. They would make the vaccine there and ship it back to the United States. The company that has that contract says that they can do that in a matter of four days. But we are talking about basically two million doses. Dr. Roth's study says we would need ten million doses in the first two weeks and we would need an expansion of that to 40 million doses within the first month to try to control the disease. This is based off of studies that say that we are not going to probably have a small little outbreak. Senator Klobuchar. Okay. All right. Thank you. Mr. Zimmerman, could you just bring me up to speed quickly on what is happening with the flocks and the repopulation of flocks since last year. Mr. Zimmerman. We are almost approaching normal now. It took about a year to get our breeder flocks back online, and as of this spring, I would say we are back to close to 100 percent production in the turkey industry. Senator Klobuchar. Yes. Mr. Zimmerman. I would like to just take a moment to echo Mr. Truex's thoughts on the organic rule. We talk about avian influenza and all we did with APHIS to limit the possibility of introduction of this virus into our barns, and here AMS brings up a rule to increase the outdoor requirements of our birds, which flies in the face of everything we have been doing with APHIS to try to limit the exposure of our birds to waterfowl and other diseases, so it is---- Senator Klobuchar. Right, which appeared to have been one of the factors. I was just going to ask you about that, so thank you. One last topic here, and I think I will put some questions about beginning farmers, which has been important, on the record. But Cuba, I am carrying the bill in the Senate, along with Senator Flake and many others, Senator Heitkamp has worked on this issue, lifting the embargo and ways to lift the embargo to Cuba. While Cuba is by no means our biggest export market, it is 11 million people 90 miles off our shore. Estimates are five million Americans a year would visit, and my fear is that if we do not lift this embargo, our five million Americans are not only going to be sleeping in Spanish hotels, but they are going to be eating food from China and Venezuela and other places. Could you comment about how--the beneficial effect lifting the embargo could have on the industry and poultry in general, as well as, I know, beef and other forms of food that we want to send over there. Mr. Zimmerman. To reiterate what you said, it is a very close market, and any time you can open up a new market to our--turkey is the perfect protein and we would be happy, more than happy to sell that product to a new market, such as Cuba. So, my understanding is there needs to be some infrastructure put into place and building their tourist industry would help tremendously to get more people to that country that would, therefore, eat our turkey. Senator Klobuchar. Yes. Does anyone else want to comment on Cuba? Dr. Hill. I recently visited Cuba, and the big--after the 2004 hurricane, the government allowed food and medical supplies to be exported to Cuba. The big problem we have right now, we can export pork, we can export beef, but the problem is the credit, because our government does not let---- Senator Klobuchar. That is part of the embargo, right? Dr. Hill. Yes. So, that is why we are not exporting pork there right now. Senator Klobuchar. Exactly, and Senator Heitkamp has a targeted focus on that, on the financing, and, obviously, the easiest way to do it overall would be to just lift the embargo, but we are looking at compromises to try to get some of our fellow Senators on board, although there is just growing support. Representative Emmer, who is a Republican over in the House from Minnesota, is carrying one of the bills in the House. So, we just see a lot of growing support for this effort and I want to thank you. Thanks. Chairman Roberts. Dr. Hill and Senator, I just want to say I have been to Cuba here recently and talked to the Ag Minister there, whose main concern was access to our export programs, which I would agree that if that would work, certainly it would work out very well. However, they are not receiving any help from Russia, and I do not think that is going to start any time soon. On Venezuela, my question to him is, will you pay it back, and that was never answered. So, that is one of the concerns that I have. I think we ought to proceed on the best way possible, but that is a worry that I have. Senator Tillis. Senator Tillis. Thank you, Mr. Chairman. Thank you for holding this important hearing. I know that committees pertaining to this subject matter are few and far between and I think it is very important. We can talk about trade opportunities, we can talk about a number of other things, but if we do not start lifting this regulatory burden and the additional barriers that we have, trade expansion will be a moot point because our farmers will not be able to produce protein and export it. We are reaching a very dangerous point. That is something I want to focus on. When I travel across North Carolina, back in the day, you would be talking about the cost of feed, you would be talking about the prices of beef and pork and poultry. Now you talk about EPA regulations. You talk about FDA regulations. You talk about USDA regulations and all the impediments that are making it virtually impossible for farmers to continue to do what they want to do, which is to produce the most abundant, safe food supply in the world. If I appear to be a little bit angry about it, I am. I mean, we have had a few committee hearings that almost focus on who is in Grant's tomb. We know who is in Grant's tomb. We know what regulations need to be changed. We know a number of things we have to get focused on and Congress has to act. Dr. Hill, I want to start with you on the GIPSA rule. I would like for you, if you could, to explain it in kitchen table terms, so people can understand how this rule affects farmers and potential consumers. After you do that, I would like for you to tell me whether or not the USDA has reached out to you and your organization about the latest livestock marketing practices and how the 2010 rule, which we successfully pushed back, will be updated for 2016 modern practices. Also, if you have an opportunity, give me an idea of whether or not USDA has indicated to you or your organization what will be included in the rule. Dr. Hill. Well, thank you. Anticipating this might be a question, I contacted the CEO of the National Pork Producers Council and asked him if USDA had contacted our organization or the National Pork Board, and to his knowledge, we have not had any direct contact with USDA---- Senator Tillis. So we have a sweeping regulation, and have not consulted with major organizations to understand what the modern rule would need to look like to not be disruptive. Dr. Hill. Does that surprise you? Senator Tillis. Not at all. Dr. Hill. No. Senator Tillis. It angers me, but it does not surprise me. This is just another example of why these regulators need to get out. They need to go and talk to farmers and understand that this regulation is disruptive in a time when we have so many other disruptive forces. They need to actually go and talk to the people that are producing safe food and modernizing their practices because they cannot continue to disrupt what our farmers are doing. We will submit another question for the record for you to follow up. Mr. Brunner and Dr. Hill, I also want to talk about biotech with regards to the Vermont law and the patchwork of another 20 or 30 states that could come into effect. I'm afraid that if proteins are not exempted from these labeling practices the food companies are going to reformulate. Can you give me some sense of what this is going to do to the industry in terms of reformulation practices? You know, we had to beat down the COOL regulations last year. This could be another mandatory product labeling initiative that will place another burden on our farmers. If we do not act, can you give me an idea of how this is going to affect your business operations and future prices? Mr. Brunner, we will start with you. Mr. Brunner. I think that is a very good example. The mandatory country of origin labeling, failed experiment, left us with increased industry costs and facing $1.1 billion in tariffs from our two best trading partners. I believe there is a huge lesson to be learned there, from trying to furnish something to consumers that they are not willing to pay for. Specifically to the beef industry, it takes somewhere in the neighborhood of 70 to 100 bushel of corn per animal to finish those animals---- Senator Tillis. 90-plus percent of the corn produced in the United States is a product of biotech engineering, is that correct? Mr. Brunner. Exactly, sir. Senator Tillis. So you are not going to reformulate since there is not enough non AE corn grown to feed these cows. Mr. Brunner. There is no way to identify preserve without adding very significant cost. It would--it is just commercially impossible. Senator Tillis. Dr. Hill, do you have anything to add to that? Dr. Hill. Well, I would think it would have the opposite effect on what I think the USDA wants. It would cause--the packers would be so fearful of all these regulations, they would increase their own production. So, we have a lot of programs, as Mr. Brunner pointed out, that add value for the producer, antibiotic-free, ractopamine-free, housing, all different kinds of, like, genetics that we get premiums for, and if the GIPSA was--if they implemented what was in 2010, that would be a huge problem for those kind of programs and would be detrimental to the profitability of not only large producers, but small producers, because small producers are the ones that really take advantage of some of these niche markets. Senator Tillis. Well, thank you. Mr. Zimmerman, I am going to submit for the record some questions on HPAI for you. I know that my state's Agriculture Commissioner, Steve Troxler, sent officials to Minnesota, to learn from practices that were established up there during the outbreak. I have got a couple of questions that I will follow up on, but I want to personally thank you for your leadership and dedication in this area. Mr. Chairman, if I appear to be a little bit frustrated, it is because I think that time is running out. We have had enough discussions and we know what the issues are. We have got to solve the biotech labeling issue in the near future. We have got to beat back GIPSA again. All of these disruptive forces that do not add value, do not do one thing to accomplish any progress on food safety. Instead, it puts another burden on our farmers that they cannot possibly afford to have lopped on them. Thank you. Chairman Roberts. Senator Tillis, I have not noticed any change in your demeanor at all. [Laughter.] Chairman Roberts. Senator Stabenow has a brief question. Senator Stabenow. Mr. Chairman, I want to follow up on this---- Chairman Roberts. Senator Heitkamp, you are next. Senator Stabenow. --if my colleagues would indulge me, because, obviously, the issue was raised and biotech is a very difficult issue for all of us who support biotechnology and production agriculture, and at the same time, through no creation of ours, there is a growing demand and actions coming from consumers. So, I just think it is important as we are wrestling with this to be clear, and Mr. Brunner, maybe you can tell us how you are affected by the Vermont law. Mr. Brunner. You know, I would not be expert on the Vermont law. We have not spent a lot of time studying it. I do know very---- Senator Stabenow. It is my understanding you are exempt. Meat is exempt, correct? Mr. Brunner. That would be a very important aspect of any efforts into genetic labeling. You know, as I---- Senator Stabenow. But I just think it is important to know that you are exempt, so there is a different kind of urgency around this because you guys are exempt from Vermont. Mr. Brunner. Well, we might also be concerned about what might follow, and the press---- Senator Stabenow. No, I understand. I just think this complicates the issue for us as we are looking. But, I also wanted to just ask anyone who would want to respond, I think there is a general exemption around feed that is very important, the feed exemption, but the challenge that is being debated is from a consumer standpoint. If we have a can of soup that is vegetable soup or a can of soup with beef broth and meat in it, one would be labeled and one would not be, which I think is probably more of a challenge if we were following the Vermont labeling law, which from a consumer's standpoint or from a grocery manufacturer's standpoint is a different issue, when you are having to go through and sort of figure that out with two cans of soup and one is exempt and one is not exempt. So, I wonder if anybody would want to speak to how we deal with that or why that is a good idea. Mr. Brunner. Senator, very briefly, could not the voluntary labeling program that we already have serve that need and find out if there is a willingness for a significant enough portion of the market to pay for the cost? Senator Stabenow. Well, Mr. Chairman, I am not going to go on and debate this more at this point in terms of voluntary and mandatory. I think what we are trying to do is how to figure out at this point what is coming at us, which is something that is a requirement, and how do we put together a balanced coalition that is going to allow us to get something done in a reasonable way that addresses very different requests and very, very different needs, and this is a tough one. So, just wanted to get your perspective on this one issue that has been an issue of concern and trying to work through. Thank you. Mr. Goggins. Senator, if I may add---- Senator Stabenow. Yes, sir. Mr. Goggins. I think, speaking in that regard, I think we should--I mean, something needs to be done to get some uniformity---- Senator Stabenow. I agree. Mr. Goggins. --and less confusion for the consumer. I think as far as the beef goes, on probably a different note here, but I do think we have to remember that these cattle that do eat GMO feed are not genetically modified themselves by eating it. Senator Stabenow. I agree, and I think there is general agreement on that, so thank you. Chairman Roberts. Well, Tracy and Mr. Goggins, thank you so much for your commentary. It is exactly what I think is appropriate. If any of you are into wine production, maple syrup, ice cream, dairy, meat, you do not have to worry about it. So, that is an example of what happened in Vermont, which means every state could exempt their home products and have about 30 or 40 labels and the entire food industry would collapse. We are trying our very best to reach an accommodation and the Committee has already spoken to this and we have already had an attempt on the floor of the Senate. The House has already spoken. So, we hope that we can find an answer just as soon as we possibly can. Tempus is fugiting. Time is a factor. So, thank you for your commentary. Finally, Senator Heitkamp. [Laughter.] Senator Heitkamp. Thank you, Mr. Chairman and Ranking Member. It has been an interesting dialogue. I want to make maybe a couple points before I start getting into high frequency trading, and one of the reasons why I particularly was interested in this hearing, which is the cattle market. First off, a lot of the challenge here is your relationship to your consumers, whether we are talking about new regulations on organics, whether we are talking about antibiotic regulations, we have got to have more informed consumers and that has been one of our challenges, which is try and maintain a readily available, high quality food source in this country that people accept as high quality and accept as available to them. You know, I would challenge you that as we are dealing with these challenges, you need to deal directly with consumer challenges, because even if we eliminate the regulation, I have a feeling that consumers are going to continue to demand a label that then becomes voluntary and takes us to a place where we erode the availability of high quality food. I think there are some real challenges in all of this. But where everybody points a finger at government, I would suggest that this movement did not start at USDA. It did not start in this committee. This movement started as a consumer information movement. If your only response to this is, ``you do not need to know,'' I will tell you, as producers, you will lose. You know, if we said that to our constituents, well, you do not really need to know what our position is on that, we would probably lose, too. These are challenges. I have supported the Chairman and I have supported trying to get to some kind of preemption for a label. But, I remain frustrated that we have not been able to really drill down and do a better job involving consumers in this discussion. I also, Mr. Brunner, would tell you I held a hearing, or a meeting last week, and one of the answers to the concerns about the cattle market was reestablishing COOL. So, we know that is not a unanimous opinion within the cattle industry. But, my main focus, I hope, will be on how do we get trust back into the cattle market. I know you have just been--your organization, Mr. Brunner, has done yeoman's work with Chicago Mercantile. They are trying some things right now that they think may help kind of correct the market. I think, Mr. Goggins, you know what this has cost cattlemen in my country and in Montana. You understand what these fluctuations have meant. What else should we be doing with the cattle markets to bring people back into the markets and stop what I think is speculation and start getting to a real cash price that reflects fundamentals? I am going to start with you, Mr. Brunner. Mr. Brunner. Well, as I said in my opening comments, we are in the situation of growing cattle numbers, growing beef supplies, and not access, not competitive market access to the markets that we need. Trans-Pacific Partnership would increase our ability to compete on a competitive basis with Australia into Japan. We have already lost $300 million into that market and the disparity will continue to grow, because Japan and Australia have a bilateral agreement that grants them preferential treatment. So---- Senator Heitkamp. I start every one of my discussions about trade saying 95 percent of all potential consumers in the world do not live in this country. Mr. Brunner. I believe that is very accurate. Senator Heitkamp. If you think we can continue to be a country that is a dominant economic power without accessing markets, we are wrong. If you do not think we need to lower trade barriers, you are wrong, especially for the products that we grow in North Dakota. Mr. Goggins, can you just offer some insights on the current problems that we have in the cattle market and what we should be doing to fix them. Mr. Goggins. I think there are quite a few things that are contributing to what we have gone through. I mean, I think the strength of the U.S. dollar right now has prohibited our ability to export our product, not just beef, but commodities in general. I think there is--a huge problem has been the volatility in the Futures Board market. I just---- Senator Heitkamp. So, how do we fix that? Mr. Goggins. I am not really sure. I think we do things like NCBA and people within the industry are doing as far as working with CME and coming up with some way to slow the market down. Senator Heitkamp. So, would you not agree that it is a problem when--I think the number that was used was about a fourth of all cattle actually move through the market this way on a cash basis but yet establishes the price, and that is a-- when you have a thin market, there is always room for mischief in a thin market when you do not have enough participation. So my question is, how do we expand participation? Mr. Goggins. I think there are several things going on. Today, right now when we are having this hearing, they are having their first Internet sale. There are feedyards putting a certain percent of their show list on the sale today and they will be sold across that video auction, trying to get a truer, more immediate, more transparent way of seeing what these cattle are actually worth. Hopefully, we can get more cattle sold on a cash basis, because it is--the cash basis then forwards on to the Futures Bond and that is how we are supposed to make our market on the Futures Board. Right now, there is--the Futures Board just does not follow the fundamentals of what cash is bringing. It is really becoming a serious problem, I think, especially from a risk management side, because I think there has been--I do not think any of us know the amount of equity that is going to be lost and has been lost, but it is going to be unbelievable---- Senator Heitkamp. Yes. When---- Mr. Goggins. --what we see in this deal. These bankers, when I go in or a young person goes in and wants to get a loan, these bankers, the lenders are definitely going to make them get a hedge position on that Board. So we have to make it a more stable market. Senator Heitkamp. Well, I do not think there is any doubt about it, or people are going to move out of the cattle business, which is just going to compound this. Mr. Brunner, I will give you the last comment, but I do want to applaud your work and your Association's work with the market. You suggested in the beginning of your testimony that you were not interested in any changes. You guys are going to watch it. But I want you to know that we are watching it very closely. I associate myself with Senator Grassley's remarks. We want to know what more we can do to push for a fair and open market so that we do not lose equity and that we do not lose producers. This is a tough business. Anyone who thinks it is easy being a rancher in North Dakota, you are wrong. I mean, when you are pulling a calf at 2:00 in the morning and there is a snowstorm on the way, that is not an easy life, but it is a life they want to continue living. But if they cannot make a living, that is bad for all consumers, it is bad for America, so---- Mr. Brunner. Senator, very quickly, I think one thing that we are discovering is high frequency trading is utilized throughout all financial markets and the CFTC has told us that they have been observing it, as well. I think in many other markets, it gets covered up, because cattle are a somewhat unique commodity. We are a perishable commodity. We cannot put the grain back in the bin and wait until the market stabilizes. I would also like to give due respect to Senator Grassley's figures, or information that he supplied. I would not directly contest any of those, but those are symptoms of an evolving industry that is trying to maintain and increase its competitiveness in the global economy. As we work to try and achieve efficiencies within our industry, relationships develop as we coordinate up and down the value chain. So those decreasing number of animals trading on a cash market or spot market is bound to diminish. But, it is an industry question. We are very concerned about it. I have been thinking about this, worrying about it. It has been going on for 20 years and we are going to continue to work on it and we will solve it. Chairman Roberts. Senator Hoeven. Senator Hoeven. Thank you, Mr. Chairman. I appreciate our witnesses being here today. First question, just--well, actually, the first one is for Mr. Brunner and Mr. Goggins. What is the number one thing we can do to help our cattle producers right now with low prices? What is the number one thing we can do to help them? Mr. Goggins. I think the number one thing would be, I really think, passing of the TPP will open up our trade with Japan and lower our tariffs. I really think that would be a huge thing. I also think helping us with stabilizing this market as far as the Futures Board would--some way or another, getting it to where it is a more viable risk management tool, I think would be huge for this industry and for the way we can go forward. Senator Hoeven. Meaning what when you say stabilize the futures market? That would mean doing what? Mr. Goggins. Well, I think maybe getting the limit--right now, the feeder cattle limits are four-and-a-half, and I personally, and a lot of us within the industry that trade it every day, believe that limit does not fit the industry. The algorithmic trading along with that, it causes huge violent moves and it--I mean, when feeder cattle move $13 in one week one way or the other, it might go $15 one way or the other, there is no way these feeder cattle move that much on a cash basis consistently the way it has done the last year. Senator Hoeven. Mr. Brunner. Mr. Brunner. What Mr. Goggins has proposed might help and it might not. Our organization believes that it would be fruitless and maybe foolish to try something without really studying what effect it might have, and that is why we need the data. We need data from the CME on what is going on in the futures market, what the high frequency trading is really doing to the market, how prevalent it is, and how it is moving the market on these large move days. So, in direct answer to your first question, though, I agree with Mr. Goggins. The one thing that you could do is help us pass TPP. We need expanded markets for the expanding supplies that we have in our industry. Senator Hoeven. So, my next question is for whoever wants to take a swing at it, but whether it is cattle or poultry or other livestock, we are seeing growing exports, but at the same time, we are seeing prices continuing to go down. So we have low inputs, so you have got low feed cost. You have got growing export. How come our price continues to go down? We are down about 15 percent, I think, since the start of 2015. But think about it. You have got cheap feed and you have got growing exports. Why is the price going down? Mr. Brunner. We do not have---- Senator Hoeven. It is not just cattle now, you know. Mr. Brunner. I think I said earlier, we had ten pounds of total protein available to the domestic consumer last year than we had the year before, and this year it will be even an increase. We have growing supplies of all proteins, pork, poultry, as well as beef, and our export markets are not growing fast enough to take those up. Part of the reason, the value of the dollar has been cited. I cannot help but go back to TPP. We are on unlevel playing field. Australia has---- Senator Hoeven. I think the value of the dollar is the biggest problem in terms of our--all exports, certainly ag exports, but all exports. The dollar being so strong is really tough on us. Mr. Goggins. Senator, may I add, according to the USDA, through 2015, as far as beef production goes, we had a 500 million pound increase over 2015 in our imports. We had a 250 million pound decrease in our exports. That is 750 million more pounds that is being put on the domestic---- Senator Hoeven. So you are saying import volume is part of this price depression, import volume. Mr. Goggins. I really do. Senator Hoeven. Well, that is important. Mr. Goggins. I think that is about a three percent increase. So, it takes, according to the USDA, it takes--for every one percent sway one way or another in supply, it affects your price one-and-a-half to two percent. So, I really think that extra 750 million pounds of beef product that we had on the domestic, it is our trade deficit. Senator Hoeven. Let me--one final question. I am about out of time. WOTUS, Waters of the U.S., how does it affect your producers? I would like all of you to take a swing at that one. Mr. Brunner. It affects our producers' ability to enjoy their private property rights in the most efficient, economical manner for their operations. It is a massive federal government overreach. It goes far beyond clean water and navigable waters of the United States. It is an intrusion into private property rights. Mr. Truex. I agree with that. In our industry, it limits the amount of land we can apply manure on. It has all kinds of restrictions. There is a lot of overreaching burden that goes with the current regulations. Dr. Hill. Yes. The only thing I would add is that I think it will be a boom for environmental lawyers because we will be sued until who knows what happens. Senator Hoeven. Mr. Goggins. Mr. Goggins. It affects every sector of agriculture, the rule, and it is basically--it touches every state, every corner of this country, and I think it takes--it will take due consideration and time for the review. I mean, the voluntary conservation has been a really good success. I think the best stewards of the land are those of us on the land. I think it really affects our property rights, as well. Senator Hoeven. Mr. Zimmerman. Mr. Zimmerman. I would concur. Manure management plans will be much more difficult and still the unknowns. We really do not know how it is going to affect us. There is too much uncertainty there. Senator Hoeven. Thank you. Chairman Roberts. Senator Donnelly. Senator Donnelly. Thank you, Mr. Chairman. I would like to thank Mr. Truex for being here. He is a leader in Indiana agriculture. He is someone we are very, very proud of, and I will tell you, Mr. Truex, since you told the Ranking Member, Senator Stabenow, that you buy your organic eggs from Michigan, she has become a big fan of yours, as well. [Laughter.] Senator Stabenow. That is right. Senator Donnelly. I know you have had your hands full with the avian flu outbreak. I am very, very proud of how we responded in Indiana, how we have worked on this. Can you tell us some of the things that you think that were done right in responding to that. Mr. Truex. Yes. I think government, USDA, and the industry learned a lot of lessons from the Iowa situation, and as we were preparing for this, we had our state vet, Dr. Marsh, speak to the entire UEP organization in October of last year about how Indiana is prepared for this in our state. Then, unfortunately, as this spring, Indiana had its own high path AI outbreak in Southern Indiana, and I think it is a testimony to the lessons that USDA learned, that the states learned, that we were able to control that outbreak rapidly. It was put away. I think the lessons learned are there is a way to control it, and I think as Mr. Zimmerman said, the key is instant response. You have got to have a plan. You have got to know what you are doing. You have got to have it all prepared so you do not get the different agencies fighting with each other over what you can do in a state, what you can do in a county, and what needs to be done. So, I think the industry and USDA is much more prepared to deal with any future outbreaks and keep it contained in a much smaller area with fewer bird numbers. Senator Donnelly. So, do you think, and it sounds like this is one of the keys, that it is not the moment that you learn about the fact that avian flu has arrived as it is, in effect, almost preparing for the worst, hoping for the best, but having every single thing you can think of lined out and ready to go. Mr. Truex. Absolutely. Our state Poultry Association and our state vets' office have worked together very, very hard and they have really put the effort in and we are prepared in the State of Indiana too, when we find we have a problem, we will deal with it quickly, rapidly, and control it. Senator Donnelly. Let me ask you just to pick up on some of the other questions that have come before us so far. I was just wondering the difficulties that you will face and the industry will face logistically if we cannot find a federal solution to the labeling of GE materials as we move forward, if we are not able to get that done. Mr. Truex. Well, our industry is very concerned, and as the Ranking Member pointed out, thankfully, meat, milk, and eggs are exempt at this point in time and we hope it continues that way. A patchwork of different states would be a nightmare when it comes to--we sell our product in probably 40 or 50 different states, along with export. So, a standard has to be set. You cannot label your cartons on 30 or 40 different standards. So, a federal level that overrides all state regulations has to happen. Senator Donnelly. Thank you. Thank you, Mr. Chairman. Chairman Roberts. Senator Thune. Senator Thune. Thank you, Mr. Chairman. Thank you to the panel for being with us today. I appreciate your testimony and your responses to all the questions, and I am sure a lot of these issues have been probably beat to death by now, but I did want to just follow up a little bit on the labeling issue. As you know, and I am sure it has been discussed that the Senate is considering a path forward on biotech labeling, and the question I guess I have is does anyone on this panel believe that animal products should be included in mandatory labeling of biotech products, or should meat, dairy, and other animal products all be exempt from biotech labeling? Let me just say that I know that there has been this argument made that consumers really want meat to have mandatory biotech labeling, but I guess my question is, is that what they really want or is that what they are being told they want by labeling supporters, because that strikes me as that is not something that I certainly hear from my constituents out there. But, tell me what you all think about whether or not the labeling issue that we are having the discussion about here ought to apply to meat, dairy, and other animal products, or whether they ought to be exempt. Mr. Brunner. Well, very quickly, our organization does significant consumer market research and the consumers that we talk to, they are not telling us that, either. Senator Thune. Okay. Anybody else? Mr. Truex. We would just like to say that the science of the animals that eat genetically modified grains, there is no scientific evidence that passes through the meat or the product, the egg or the milk. So, we would like to stand behind that very firmly. Senator Thune. All right. Dr. Hill. Yes, and that is a view that the Europeans take, too. So, I think that tells us a lot right there---- Senator Thune. Yes. Dr. Hill. --because they tend to be more reactive on these issues. The other thing is that, the more and more sorting that we ask the packing industry to do, the less efficient they become, and there is just so much sorting that they can do. If we had non-GE and GE meat, it would be a nightmare for them to try to track that product through the whole meat chain. That would be a disaster. Senator Thune. Well, it strikes me that, yes, I guess that pretty much answers the question. When we are getting to the left of Europe on some of these issues, we are probably out of the mainstream when it comes to this country. One of the things when I visit with cattle producers in South Dakota, one concern I hear quite often is regarding the consolidation across the beef industry. So, I guess I would direct this to Mr. Goggins. What role does consolidation play in the competition in the markets, and what trends and producer marketing strategies are you seeing in response to consolidation? Mr. Goggins. Well, I think as far as our organization, I mean, with our auction markets, with our video company, we are promoting the highest--and actually in this part of the world, the United States, we raise the highest quality, as good of beef cattle as there is in the world, and we are putting a pretty good show list up. I mean, I grew up in the auction business, not only the ranching business, but went to the stockyards every morning and kind of grew up there, and as my father always said, competition is good. We need competition in the marketplace. We promote it every day and we do the best we can to get competition and buyers in the seats every day. We work at it. I think we need to move that up the chain as we go, at the fed cattle level, as well. But, we do everything in our power to do that. Senator Thune. On a scale of one to ten, regulatory burden of government. I know it has all been talked about probably at some length today. In terms of the issues that you have to deal with or the issues that concern you with regard to the future of the livestock industry in this country, where would that rank? Mr. Goggins. Twelve. [Laughter.] Senator Thune. Okay. Mr. Brunner. Ten. Mr. Goggins. It is high. Since you brought that regulatory up, in the feeder cattle business, especially in your part of the world, South Dakota, Montana, you get especially our way West and South, you get further away from the corn belt. You get in the East Coast, Florida, where a lot of feeder cattle are, I think we need to be real conscious of--we have had the livestock haulers exempt, I mean, the movement of these--the interstate movement of these feeder cattle, livestock in general. If you load a set of cattle in Western Montana and go clear to Kansas with them, it takes more than ten hours---- Senator Thune. Right. Mr. Goggins. --and I think if you get those cattle loaded up, you have got to unload them somewhere ten hours down the road and then let them stand in a dry old lot, not taken care of very well for another ten hours, load them back up. I mean, we always base our death loss as far as the feeder cattle that we buy from one to two percent. Now, we start unloading these things, because the trucker has got to have ten hours of sleep, I think it becomes a real animal welfare issue. I think these cattle are--instead of a one or two percent death loss, we are going to be looking at ten, 20, 30 percent death loss on these cattle, which, in turn, it is going to affect the value of these feeder cattle in those areas that are quite a way from the feed, and I think it is something that we really need to address. Senator Thune. You referenced, I think, in your testimony, the commercial livestock hauling, and I want to point out, because I serve as Chairman of the Commerce, Science, and Transportation Committee, that we were involved in leading the successful effort to make hours of service exemption from rest breaks permanent for those who are carrying livestock and bees and it--the provision takes into account the health of the livestock, which--and the practical reality that these animals should not be left on the roadside. So, the exemption was granted, I think, on multiple occasions by the FMCSA, the trucking agency, and we made it permanent to prevent the need for repeated consideration of these same facts. So, there is--it is in Section 5206 of the FAST Act and hopefully that will provide some relief on that front. But, I know that in terms of regulations, and I am sure it has been covered, as I said, at length, Mr. Chairman, but I just have to say that when you are trying to make a living in production agriculture these days and the government is constantly your biggest enemy, something is wrong. We just see it on every front, and I hope that changes. Obviously, we are going to do everything we can at this branch of the government to keep that from becoming the biggest liability to making a living in agriculture. But we could certainly use some help from a lot of the agencies who evidently have way too much time on their hands around here, because it just seems like every day, there is something new coming out that makes it more expensive and more difficult to do what you do and to help us feed the world. So, that has got to change. Thank you. Thank you, Mr. Chairman. Chairman Roberts. Senator Ernst. Senator Ernst. Thank you, Mr. Chairman. I would like to thank all of our witnesses today for being here, especially Dr. Hill. Thank you for coming out from Iowa. It is really good to see you again, so thank you. We have got a lot of important topics that have been discussed today and I want to thank all of you for your input. I am glad that you have highlighted the challenges that your sectors are facing right now, whether it is from market volatility, burdensome agency regulations--jeepers, how many times have we talked about WOTUS--foreign animal diseases, international trade barriers--I am going to come back to that-- or labeling requirements that would disparage our products. Let us talk a little bit about--I know everybody has wanted to talk about it, TPP. About a year ago, I was in Vietnam and Singapore and the topic of discussion there, of course--and this was a defense conference that I had traveled to in that region--but they wanted to talk about TPP, because a number of those world leaders, the military leaders, they really wanted to have the United States as a primary trade partner, and the push-back was that if you are not our primary trade partner, there is another country in the region that does want to be our trade partner, and that, of course, is China. So, I would like to hear your thoughts on that in relation to if we are not stepping up to the plate, what are the other players out there that might fill in the gaps if the United States is not involved in trade with these nations, or expanded trade with these nations. Mr. Brunner, if you could start, please. Mr. Brunner. Well, China has their own 16-nation potential trade agreement that they are actively promoting in the advent that the United States does not go forward with TPP. As has been said, TPP would include 40 percent of the world's economies. It is also based on ethical standards and sanitary standards that are dictated by the United States and I do not believe we want to abdicate our role in the global community and the Pacific Rim to China. You know, it has been pointed out to me, and I firmly agree, that we do not maintain world peace and competitive position in the world economy by shirking our responsibility. So, we firmly believe TPP now. Senator Ernst. Very good. Mr. Truex. Mr. Truex. I really do not have a comment on that because of our industry does not really play into that so much. Thank you. Senator Ernst. Wonderful. Dr. Hill, of course. Dr. Hill. Well, I would agree with what Mr. Brunner said. You know, it is obviously important from an economic standpoint, but I think it is equally important from a geopolitical standpoint. Countries that work together, trade together, are going to be able to sit down and talk and work out problems a lot better than if they are not trading. So, I think it--I do not know if you could say the economic impact or the geopolitical impact of TPP is more important, one than the other, but they are both very, very important, and---- Senator Ernst. Very good. Dr. Hill. --we would encourage the Senate to work hard to get it passed as soon as possible. Senator Ernst. Absolutely. Mr. Goggins. Mr. Goggins. Yes. I think it is a very positive thing, if we do get it passed, for the U.S. cattle producers. I mean, I think it opens up the export market back to Japan and reduces our tariffs. I do think we need to--there need to be measures in place, though, to address the cyclical and the perishable nature of the cattle and beef in addition to protections against dumping. Senator Ernst. Very good. Mr. Zimmerman. Mr. Zimmerman. Well, I have a specific trade barrier example that we are dealing with currently and it involves Canada. A lot of our poultry, baby turkeys, come from Canada. They are hatched in Canada, but then they cross the border and are raised and processed in the United States. Currently, that poultry, when it comes in the United States, can no longer be exported to South Africa. But if that poult, baby turkey, stays in Canada and is raised and processed in Canada, it can be exported to South Africa. So, technically, it bans all U.S. turkey from the South African market and it is just an incredibly silly rule, and we mix our birds. One of my flocks may be ten percent Canadian and 90 percent U.S. hatched, but they are all no longer eligible for South African use. So, it is an incredibly silly trade barrier that we would really appreciate your help in revisiting and removing. Senator Ernst. Absolutely. Thank you. I see that my time is expiring, but I do appreciate it. I think we do need to look very carefully at the TPP, not only as trade, but also as a way to leverage cooperation with other nations out there. So thank you very much, Mr. Chairman. Chairman Roberts. Thank you, Senator Tillis for another round. Senator Tillis. I am not going to ask any questions, just maybe a comment, and Mr. Chairman, I hope, without objection, I can submit my opening statement for the record. [The prepared statement of Senator Tillis can be found on page 49 in the appendix.] Chairman Roberts. Without objection. Senator Tillis. Thank you. I just want to go back and maybe lower the temperature a little bit, but maybe focus on the one theme that I hope comes out of this meeting. First, the TPP and trade with Europe and Africa is absolutely essential to our future in farming, and I completely get that. I voted for TPA. I hope that we can get the TPP to a point where we get support and I will be working to that end. Mr. Zimmerman, I will be submitting a question that touches on a comment or an answer that you gave to Senator Ernst on the sort of barriers to entry with South Africa. I think we have another issue with Korea, where the HPAI seems to be used as a pretext for them putting up protectionist measures. We will be submitting a question for you so that we can better educate our staff and other members on those challenges. But, I want to go back again to the biotech labeling and something Mr. Brunner said. Mr. Brunner, you said you have not had a chance to study the Vermont law in particular. It does turn out that in the Vermont law, beef, poultry, milk and eggs have been exempted. As a matter of fact, a piece of pizza that has meat on it is exempted, but its vegetarian equivalent is subjected to the rule. This is the sort of mentality that is being used by the states to create a patchwork of regulations that will be absolutely burdensome on food companies if Congress does not act. Back to the point that Senator Heitkamp made, regarding labeling but doing it in a consistent, high value way for the consumer, but with a low impact to the producer. That can only be done if Congress does its job and acts on preemption. On GIPSA, we need to work very hard to see if we can accomplish this Congress what was accomplished in 2010. Either get the regulations to a point that you think are fair and can be dealt with or do our very best to try and disallow them so that we are not adding just another burden on an industry that really cannot afford more burdens. Thank you, Mr. Chairman. Chairman Roberts. I thank the Senator. I think both the distinguished Ranking Member and myself have additional comments we would like to make with regards to the agriculture biotechnology situation. It is called ABT. It is not called a GMO. We had a hearing with the USDA. We had a hearing with FDA and the EPA, all three. I raised the question, is our food safe? Are GMOs safe? The answer was yes, yes, yes. This is not a human health problem. This is not a safety problem. This is a marketing challenge, and you all know what I am talking about. But, it has been very difficult to get this pulled together. We had over 800 organizations come to this committee and ask us to settle this. We passed a bill 14 to six in this committee. Unfortunately, we were not able to go to the bill. That takes 60 votes in the Senate and that has posed--our Founding Fathers wanted us to go a little slow as opposed to those folks who were closest to the people, the House of Representatives. I understand that, and that is not going to change, I hope. So, we have 60 votes to overcome to at least go to the bill, which was the second bill that we introduced that we tried to draw some folks over. The distinguished Ranking Member and I have been meeting overtime on this issue. So, I want you to know that this committee wants to get an answer. I also want you to know that every person on this committee, I do not know of any exception, are standing behind efforts to get TPP done. Tough atmosphere. Every trade bill that I have ever been associated with has been over-criticized and it has been oversold, and it takes hard work. Senator Tillis and I were in Australia, Indonesia, Singapore, Japan, did not have time to get to South Korea before we could get back. That was the number one issue. By the way, the second issue was do you have our back, but that is another whole discussion. So, with regards to TPP, and now we call it agriculture biotechnology, or just biotech, we are determined to get an answer and we will keep working on it. I want to thank you all for sharing your experiences related to the opportunities and challenges that your industries face. You are all leaders of the livestock and poultry sectors and your testimony today has been invaluable to this committee. To my fellow members, we ask that any additional questions you may have for the record be submitted to the Committee Clerk five business days from today, or 5:00 p.m. next Friday, June 3. This concludes our hearing---- Senator Stabenow. Could I say something? Chairman Roberts. --except for the comments by the distinguished Ranking Member. Senator Stabenow. Well, thank you, Mr. Chairman. I just want to say thank you to everyone again and to the Chairman for the hearing and just indicate we are working very hard on a difficult issue that both Democrats and Republicans voted no on when it came to the floor. There was bipartisan support and bipartisan opposition. Because of the nature of the Senate, we are looking for that common ground and magic number to be able to get to 60, and I remain, as I have been saying now for I do not know how many years now, that from my perspective, this is about making sure that we stop a 50-state patchwork. We know biotechnology is safe. Thirdly, we have consumers that are moving at the state level and are asking for transparency and we have to find that, as well. This is not an easy issue, because, frankly, we have people coming from very different worlds. Depending on who you talk to, it is like a totally different issue, which is one of the challenges as we move through all of this. But in the interests of agriculture in our country and production agriculture, we need to find a way to come together and have common ground and, frankly, be willing to compromise in order to be able to get there, and that is what the Chairman and I are working on and we need everybody here being willing to do that, as well. Otherwise, it is going to be very difficult to get there. We are willing to do that and we are working hard and we are being asked to basically step up and take on the consumers on behalf of the industries involved and wrestle back and forth with this. I am hopeful that part of what happens long term is that we have an education effort I have been suggesting to folks for years, to be able to truly talk about what biotechnology is so that people understand that. Ignoring that discussion, or not having it in a way that addresses the world we live in, in terms of communicating with people, it is just not going to work. We have to engage people so we understand the positive side, what has happened in terms of moving agriculture forward and the positive benefits of biotechnology in that process. I would just encourage everybody to make a commitment to tell that story, because if that story is not told, this is going to be very difficult going forward, I think. So, thanks. Chairman Roberts. I thank the Senator for her comment. I would offer only one observation. The best, most effective form of communication from consumers is their pocketbook, perhaps not government mandates. Senator Stabenow. Sure. Chairman Roberts. That concludes our hearing. The Committee is adjourned. [Whereupon, at 12:10 p.m., the Committee was adjourned.] ======================================================================= A P P E N D I X MAY 26, 2016 ======================================================================= [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] ======================================================================= DOCUMENTS SUBMITTED FOR THE RECORD MAY 26, 2016 ======================================================================= [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] ======================================================================= QUESTIONS AND ANSWERS MAY 26, 2016 ======================================================================= [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]