U.S. LIVESTOCK PRODUCT EXPORTS EXCEED IMPORTS AGAIN IN OCTOBER

U.S. exports of livestock, meat, and meat products topped imports by $40.1 million in October, bringing the net surplus of trade in these products for the first 10 months of 1977 to $233.3 million.

U.S. exports of these products fell to $162.5 million in October, 8 percent below those of October 1976. Although exports of tallow and greases were larger, lower shipments of hides and skins, and pork pulled the October total down. Imports in October dropped 22 percent below the year-earlier levels to $122.4 million, primarily because of the dock strike against containerized freight. The items most affected by the strike were imports of beef, which dropped 31 percent in October below those of October 1976, and those of pork, which dropped 27 percent.

STATEMENT OF HOMER AYRES, STURGIS, S. DAK.

My name is Homer Ayres, I live in Sturgis, South Dakota. I am nearly 79 years old. I began ranching when I was 18 years of age on the North Moreau river near Zeona. I had many friends among the original settlers, who were the cowboys for the big cattle companies, and later ranched for themselves. Our family ran cattle and sheep and also saddle-bred horses. We existed through the 1920's when many ranchers were being foreclosed due to the deflation policy of the big-city banks. Over half of the state's banks folded, along with the ranchers and farmers. Those who didn't go broke were the ones too poor to borrow money and survived on very little.

I also ranched in the 1930's during the depression and the drought that lasted for many years. I feel qualified to speak on the problems of ranchers, because I have not only been a rancher but have written about the problem for many years, from about 1946, or before.

I take the position that the number one factor in the problem is the fact that farmers and ranchers are producers of food, which is a necessity for maintaining human life and can't be purchased at any second-hand store, like clothing, cars, and certain kinds of housing material.

The number two factor in the problem is that it is necessary that farmers keep on producing this food, because food production is a national, social and economic problem. Therefore it is the obligation of society to make up the difference to agricultural producers between what they receive for their products at the marketplace and what is necessary for them to keep operating, which consists of all operational costs, taxes, interested on the investment, depreciation, labor for hired people and family labor. Otherwise the farmers and ranchers are underwriting a part of the food bill by having money lending institutions make up their deficits.

The great depression of the 1930's brought to a head the basic contradiction in agriculture, when farm commodity prices were tied to complete collapse of the economy, and a truck load of grain would only pay for a grease gun for the tractor, and commission companies sent bills to livestock shippers because the stock didn't pay the railroad freight.

The whole of Congress, the Roosevelt Administration, and all of the farm organizations came to recognize this contradiction, and enacted the farm legislation based on the concept that from then on the prices of farm commodities should be related to their production costs as they existed in the period from 1909 to 1914, a period said at the time to be "fair" to farmers, or "parity." This was a break from the concept that had existed all through the many years that farm prices were determined by a law, known as the "law of supply and demand".

However at this very time certain economic forces were proposing the destructive scheme to eliminate the smaller agricultural units to keep healthy the larger ones to the tune of about half to two-thirds or the then six million units. This elimination process has prevailed since the 1930's with various degrees of speed. The so-called farm legislation each session seemed to be a result of the differences in method by which the "boys would be weeded out to save the men." The slogan was offered to the whole nation that farmers had to get big or get OUT. Those who were big watched the smaller ones go with the same vision that is portrayed when men in a small boat see a spurting hole come in one end. The ones in the end away from the hole smile because the hole is NOT in their end. Ranchers come to me and say: "the men are being weeded out now, not just the boys."

Thus for all practical purposes the advocates of a market oriented farm economy have taken the whole farm economy back to the days of the feudal "law of supply and demand." The outcome will be that in the not too distant future agriculture will be in the hands of concerns as powerful as the big energy companies, with power to lift prices comparable to coffee, or higher, so the stockholders can secure as large dividends as any other big corporation or conglomerate, either with price fixing or federal grants or both.

To tie farm prices to unemployment figures, to grain needs in foreign countries, to starving millions who can't pay for food themselves, and have to have their governments buy food to keep them alive, is certainly devastating to the U.S. producers who have fixed operating costs. To great U.S. production, and the prices of this production to our foreign policy and the need for foreign exchange for oils is unworkable, even if it helps the makers of gas guzzling cars sell their luxury wagons, as is demonstrated today when the big wheat crops are way below cost of production on the market.

A sane society should, and perhaps would, insure its continued food production by setting the agricultural end of the economy out, so to speak, and deal with in a special manner so it will be in the hands of many, instead of a few, and enact the necessary laws to pay all costs of production, depreciation, taxes, labor, and even management. I reject any plan that will simply be NEARLY enough, as today, historically, we have come to the point where there is nobody to make up the deficit when the farmers and ranchers do not get enough to keep operating. What I have suggested is in the interest of city consumers as much as the country producers. They should know this when they buy coffee and pay gas bills. But any program to shrink food production to a scarcity level to elevate farm prices to the prosperity point for farmers would make most food a luxury item for all except the wealthy, while the poor would be reduced to the place that where robbery would be considered as the way to feed the family.

The record today is very clear that in food processing and in retailing there is a tremendous "rip-off." In the recent antitrust case tried in a California federal court the jury found that the chain stores, conspired to fix cattle prices that damaged the cattlemen twenty cents a pound on all cattle sold in the United States from 1964 to the time the suit was filed in 1968. In this historic case, Bray vs. A&P, according to the Judge's decision, which is now law, the National Association of Food Chains organized secret meetings in which the representatives of the chains were identified only color badges, and discussed methods of fixing prices. This rip-off amounted to $200 on a 1000-pound animal. As the Judge's decision is now the law of the land, I would think it is now the duty of the Congress to make sure the violators of the antitrust laws were brought to court on criminal charges. All such rip-offs should be searched out, exposed and punished. At present the retail price spread, which is the difference between what the retailer pays for carcass beef, when it is bought from the packer, and that received from the consumer, is $240 per 600-pound carcass, the highest in history. In the December report published by M. J. Hankins, a Stanton, Nebraska cattle feeder, who has kept price spread records for years says: "The chains and the packers have been charging us about $300 per head for handling the beef from an 1100 pound steer. Local locker plants will do essentially the same work for about $100. Retail price spread has increased nearly $50 per head this year over 1975." When the report was written beef cattle were selling at only 55 percent of parity.

I am well aware that there will be opposition in some places to any sort of federal farm-ranch program, especially from certain cattlemen and their organization. They say "we don't want the government telling us what to do. We want to make it on our own." But any examination of the facts refutes this idea. It takes 30 to 40 acres of $100 an acre land to run a cow-calf unit in this area, at least. The interest on the land will not covered by the returns on calf crop, to say nothing of taxes, depreciation, and other operating costs. No young person can even begin to ranch nowadays unless he has a gift of about $250,000. But if he had this much he would not need a ranch.

I am enclosing a copy of a letter I wrote to the Rusmore News, in Sturgis, S.D. which I wish to include with my testimony. The facts were taken from the Billings, Montana WESTERN LIVESTOCK REPORTER, dated April 6, 1972, first published by the USDA in a supplement to the January MARKETING AND TRANSPORTATION SITUATION.

I wish to thank Senator McGovern for his suggestion that I submit my testimony in writing to him, in as much as it is not possible for me to attend the hearings the committee will hold in Sioux Falls, S.D., February 26, 1977.

Organized trade unionists, federal, state, county and city employees receive wage and salary increases, some written into wage contracts tied to cost of living, which help as inflation catches up with them and threatens their ability to make a living. No such thing exists for farmers and workers as the inflation outruns the prices of agricultural products in the form of ever increasing equipment prices, taxes, interest, and land values. It is thus necessary for society, through the government, to make up the difference between what farmers and ranchers get in the marketplace and full parity prices, prices that will enable them to continue ranching and farming and not be forced into bankruptcy.

Amendment 2. I oppose restrictions on the importation of manufacturing beef, or live cattle, as a means to boost prices on feeder calves and yearlings by boosting the price of choice slaughter, through boosting the price of manufacturing beef bought mainly by low income families. 1. The United States exports more dollar's worth of livestock products today than it imports, the measure has little chance of passing Congress, and is part of the world-wide, and much feared protectionist movement. Further it ill-behooves any country that exports many times more agricultural commodities than it imports to make restrictions on food eaten by the poor and low income people, using a Rube Goldberg theory that reduced amounts of beef from lean cows and bulls will in some manner raise prices in Sturgis and St. Onge on well-bred feeder calves and yearlings that are converted into U.S. Choice slaughter beef.

STATEMENT OF T. A. CUNNINGHAM, PRESIDENT, INDEPENDENT CATTLEMEN'S ASSOCIATION OF TEXAS, AUSTIN, TEX.

Members of the Committee, it is with pleasure that I once again appear before you on behalf of the Independent Cattlemen's Association of Texas. Over the past three years I have appeared before you numerous times to express the position of this association and to ask for your help for the cattle industry. I am aware that the members of this committee have put a great deal of effort into helping the people in agriculture.

When this organization was founded in 1974, during a great depression in the livestock industry, we went to all people in agriculture to seek their help. We preached time and time again that agriculture is one family and that if one member of the family finds itself in such a depression, than the whole family would soon find itself in the same situation.

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Today we regret to see that agriculture as a family is experiencing the worst depression in recent history.

The farm problem is not only a farm problem. The farm problem is not only a farmer's problem. The farm problem is a national problem. A nation can maintain its greatness only as long as it can compete in the world market with a raw product produced by its own industry. For years the raw materials produced on the farms and ranches of this nation have managed to balance trade until now. There is no way of telling how many dollars have been lost in trade to the ridiculously low prices placed on our agricultural products. Foreign nations do not buy our products because our products are cheaper. They buy our products because they need them.

We are the only nation that buys products we do not need, such as beef. Over the past weeks many ranchers and farmers have traveled here to Washington to express to you and your colleagues their need for some sort of assistance. Their solution, a guaranteed 100 per cent parity, may not be in the realm of possibilities. It is sad that these people have been pressed to the point that they must come here to demand what is rightfully theirs a fair return on their investment. It is even sadder that the government has let the finest agriculture in the world reach a state of bankruptcy.

The people in agriculture are, in essence, asking that the policies of the government be changed from a cheap food policy to a fair food policy. In curbing inflation, government policies have sacrificed the agricultural sector of the nation. Prices received by the farmer have been held down while at the same time the farmers' costs have risen at an alarming rate.

Inflation is much like a body of water. It flows toward the least resistance. So few of us constitute such a small segment of the total United States population. Just more than 3 per cent of the total population provide food and fiber for 215 million people in the United States alone.

It is no wonder that this country is in such a sad economic state. The farm crisis extends into every rural town in America. The small towns are feeling the pressure. Rural America constitutes 27 per cent of the total population. The impast has found its way into the cities. The agricultural producer cannot afford to buy the products produced by industry in urban areas. Few farmers and ranchers are buying new farm machinery, trucks, or equipment. This only adds to the long unemployment lines in the city.

In the past the agricultural producers have been misled and often manipulated by government forecast and crop reports. Not too many years ago, the American farmer was told that in order to head off vast world wide food shortages, it would be necessary to plant fence row to fence row. We beef producers were told to increase herd size, to maximize production for it would be impossible to supply the country with the beef necessary in 1980. These forecasts were nothing more than myth.

All agriculture is in a depression. Because I represent the cattle industry, I will direct my comments to the cattle industry. Since 1974 we have asked for relief from beef imports. The law still remains unchanged. I realize that this committee does not have jurisdiction in changing the meat import law. However, it does have the expertise to influence other congressional members into pushing a revamp of the present law. It is ever so important that a new import law be developed while the Congress's attention is turned to the direction of assisting those in agriculture.

The present law for setting meat import quotas is Public Law 88-482. This law is better known as the Meat Import Act of 1964, or referred to by cattlemen as the Bankruptcy Law of the 70's. This law must be changed. It has been estimated that cow prices would have been 26.2 per cent higher in 1975 and 30.2 per cent higher in 1976. This comes to about $1.6 billion dollars in 1975 and $1.8 billion dollars in 1976.

The 1964 Meat Import Act is ineffective in these areas: 1. The current law allows an escalation of meat imports in line with domestic production. This means more imports at times when less is critically essential to U.S. cattlemen. 2. The quotas set do not include all processed meats and live cattle. The present law only includes boned beef allowing any processed beef such as diced, cubed, or whole cuts to bypass the quotas. In 1976, the United States received more than 970,000 head of live cattle from Canada and Mexico. In the last month of 1977 our markets were flooded with 594,020 head of cattle. The total from Canada and Mexico reach an astounding 1,554,056 head. These cattle bypass the quotas set by law and are actually calculated into the quotas as domestic production which increases the allowable amount of imports.

Several methods have been proposed to better stabilize our markets through responsive meat import allocations. Any method adopted must be countercyclical in nature. That means less imports when domestic supplies are adequate and more imports when they are needed. It is important that the method adopted be responsive to the actual supply and demand of our domestic product. This can best be achieved by tying the import quotas to prices received by the producer in relationship to prices paid for production costs. Legislation which would require this method has been introduced by Sen. Henry Bellmon and Sen. Lloyd Bentsen. The legislation requires quotas to include all processed meats and live cattle as well as boned beef. This method provides a formula which determines import quotas as a percentage of domestic production. The index referred to as the production cost price index, triggers import levels.

Under these proposals, consumers have protection from extremely high meat prices. Imports would serve to adjust supply and curtail excessive economic profits in the industry. The fundamental concept of pure competition would come into play. As profits are realized more imports enter the market bringing the market prices back to a reasonable profit level below 100 per cent of parity.

The consumers of this nation have suffered greatly by the effects of the 1964 Meat Import Act. It is hard to estimate the actual dollars and cents that have been lost or the nutritional impact suffered by those who at times could not afford beef at inflated prices.

The 1964 Meat Import Act causes wide fluctuations which promote a great "rip off" of the American consumer. In 1973, cattle prices reached an all time high due primarily to the unresponsiveness of the 1964 law. In the following year, cattle prices reached an all-time low, but the retail prices remained about the same. Packers and retailers across the nation received windfall profits at the

expense of the American consumer. This will happen time and time again until the markets of the American livestock producer become more stable avoiding a boom-bust syndrome.

Changing the meat import act by making it more responsive to supply and demand will actually benefit foreign producers.

A change would help stimulate the foreign nations' own cattle prices. The world beef market is set by the U.S. market. Allowing more beef imports when our market needs them rather than letting them in during our liquidation periods would increase meat prices in the foreign countries.

There would be relatively little change in dollar transfer. The foreign countries would be sending less beef at times, but for substantially better prices.

Although this committee does not have jurisdiction in changing the meat import act, you do have the power to act upon another area of meat imports that is very important. This area deals with the inspection and labelling of imported meats.

Despite bad economic conditions, the quality of the cattle in this country has steadily improved. This industry has adjusted to the needs and wants of consumers. As we adjusted, we have more than doubled the consumption of beef in the past half century.

The great increase in consumption of beef can be attributed to many factors. One of the largest factors is the confidence of consumers in the sanitation of domestic beef products. Congress has set standards over the years that have demanded the highest quality of meat inspection possible. The present system used for the inspection of beef requires our packing plants to abide by a standard far tougher than other countries of the world. This policy is to be commended and should be appreciated by every consumer.

Slaughtering plants across the United States are constantly checked by on-site inspectors. It is important that this procedure also be required of all slaughtering plants in foreign nations that ship their products to the United States.

At this time, it is questionable that the quality of inspection in these foreign countries is anywhere as strict as ours here in the United States. I understand that presently 20 inspectors are assigned to inspect more than 1,100 slaughter plants in some 46 countries. Of those 20 inspectors, only 12 are actually on duty at a time. This allows the plants to be inspected only one to four time a year. What is even more astounding is that these inspections are announced ahead of time, giving slaughter plants ample notice that an inspection is coming. Alas, there was a period of time recently that the inspectors were not authorized to travel.

If we are to set policy in this country to benefit consumers, let this strict inspection standard existing here stand for all countries that want to share our market.

We cattlemen pride ourselves on the fine quality of beef we produce. Unfortunately, communication between beef producers and consumers in our country has been somewhat inadequate in the past. We producers must realize that consumers are our customers. Since there has been lack of communication, we must take steps to improve conditions between beef producers and consumers. The Independent Cattlemen's Association has put forth maximum effort to educate the general public in the complexities of our industry. Along with this education effort, we intend to work hard to encourage the passage of legislation that would require beef imports to be labelled in whole or co-mingled. We feel that the consumer has a right to know what he is purchasing.

Passage of this legislation would not indicate distrust on the part of the American lawmakers. Enactment of such a proposal would only substantiate a policy that American producers have lived with for years. When the high-quality of inspection standards were invoked in this country, it was not because of distrust of our domestic packers. It was simply to assure consumers of the ultimate healthiness of our meat products. Such assurances have promoted integrity in the products we produce.

The members of the Independent Cattlemen's Association feel that it is our responsibility to promote our domestically produced meat products. In living up to this responsibility, we have a nationwide campaign to encourage restaurants and retail food outlets to use our meat products.

Committee members, you will find attached to your copy of this testimony a storefront emblem that reads, "This establishment serves only American produced beef."