S. Hrg. 103-1061 BEEF AND DAIRY CHECKOFT PROGRAMS AND 1557 S. 1564) (S. ^4.AG 8/3: S. HRG. 103-1061 Beef ind Dairy Checkoff Prograns (S. .. HEARING BEFORE THE SUBCOMMITTEE ON DOMESTIC AND FOREIGN MARKETING AND PRODUCT PROMOTION OF THE COMMITTEE ON AGRICULTUKE, AND FORESTRY NUTRITION, UNITED STATES SENATE ONE HUNDRED THIRD CONGRESS SECOND SESSION ON BEEF AND DAIRY CHECKOFF PROGRAMS (S. 1557 and S. 1564) AUGUST 1994 5, Printed for the use of the Committee on Agriculture, Nutrition, and Forestry u ^-»^ ' i^^ "% U.S. GOVERNMENT PRINTING OFFICE 20-318CC WASHINGTON : 1995 ForsalebytheU.S.GovernmentFYintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-052156-4 S. Hrg. 103-1061 BEEF AND DAIRY CHECKOFF PROGRAMS AND (S. 1557 S. 1564) 'Y4.AG 8/3: S. HRG. 103-1061 Beef and Dairy Checkoff Prograns (S. .. HEARING BEFORE THE SUBCOMMITTEE ON DOMESTIC AND FOREIGN MARKETING AND PRODUCT PROMOTION OF THE COMMITTEE ON AGRICULTURE, AND FORESTRY NUTRITION, UNITED STATES SENATE ONE HUNDRED THIRD CONGRESS SECOND SESSION ON BEEF AND DAIRY CHECKOFF PROGRAMS (S. 1557 and S. 1564) AUGUST 5, 1994 Printed for the use of the Committee on Agriculture, Nutrition, and Forestry 'U' r U.S. GOVERNMENT PRINTING OFFICE 20-318CC WASHINGTON : 1995 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocument.s.CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-052156-4 COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY PATRICK J. LEAHY, Vermont, Chairman DAVID H. PRYOR, Arkansas RICHARD G. LUGAR, Indiana DAVID L. BOREN, Oklahoma ROBERT DOLE, Kansas HOWELL HEFLIN, Alabama JESSE HELMS, North Carolina TOM HARKIN, Iowa THAD COCHRAN, Mississippi KENT CONRAD, North Dakota MITCH McCONNELL, Kentucky THOMAS A. DASCHLE, South Dakota LARRY E. CRAIG, Idaho MAX BAUCUS, Montana PAUL COVERDELL, Geoi^a J. ROBERT KERREY, Nebraska CHARLES E. GRASSLEY, Iowa RUSSELL D. FEINGOLD, Wisconsin Subcommittee on Domestic and Foreign Marketing and Product Promotion DAVID. BOREN, Oklahoma, Chairman DAVID H. PRYOR, Arkansas THAD CHOCHRAN, Mississippi KENT CONRAD, North Dakota JESSE HELMS, North Carolina MAX BAUCUS, Montana PAUL COVERDELL, Georgia RUSSELL D. FEINGOLD, Wisconsin MITCH McCONNELL, Kentucky HOWELL HEFLIN, Alabama CHARLES E. GRASSLEY, Iowa (II) CONTENTS Page Statements Hon. David L. Boren, U.S. Senatorfrom Oklahoma 1 Hon. Russell D. Feingold, U.S. SenatorfromWisconsin 2 Prepared statement 4 Hon. LarryE. Craig, U.S. Senatorfrom Idaho 6 Hon. Max Baucus, U.S. SenatorfromMontana 7 PreparedStatement 9 Hon. Thad Cochran, U.S. SenatorfromMississippi 10 PreparedStatement 10 Hon. Herb Kohl, U.S. SenatorfromWisconsin 11 PreparedStatement 12 Hon. PatrickJ. Leahy, U.S. SenatorfromVermont, prepared statement 17 Hon. MitchMcConnell, U.S. SenatorfromKentucky, prepared statement .... 18 Hon. CharlesE. Grassley, U.S. Senatorfrom Iowa, prepared statement 18 James M. Webb, chairman. BeefIndustry Long-Range Plan Oversight Com- mittee/Cattlemen's BeefPromotion and Research Board, Phoenix, AZ 14 Stewart G. Huber, president. Farmers Union Milk Marketing Cooperative, Madison, WI 19 David Fugate, chairman, Tennessee Beef Industry Council, Franklin, TN 20 JiCmatNtelwesmeonm'es,Asesxoecciuattiivoen,diJraeccktsoor.n,CMatStle Industiy Board, Inc., Mississippi 22 Bob Drake, president-elect. National Cattlemen's Association, Washington, DC 23 Herman M. Brubaker, Milk Marketing, Inc., West Alexandria, OH, Rep- resentingNationalMilk ProducersFederation 36 TomGiessel, vice president, Kansas Farmers Union, Larned, KS 39 Robert Giacomini, chairman. National Dairy Promotion and Research Board, Arlington, VA; accompanied by Cynthia Carson, CEO, National Dairy Board 40 David Call, FamilyFarmDefenders, Bardstown, KY 42 APPENDIX PreparedStatements Herman M. Brubaker 53 David Call 56 Bob Drake 71 DavidFugate 73 Bob Giacomini 75 Tom Giessel 78 Francis Goodman 80 Stewart G. Huber 81 JimNewsome 84 Additional material submitted forthe record Senators' questions presentedto witnesses with responsesthereto 84 Senator Cochran 84 SenatorFeingold 85 SenatorBoren 87 Issues/forthe USDA/AMS 88 Position statements Tom Giessel 101 JamesM. Webb 102 Cattlemen's BeefPromotion & Research Board 108 (III) IV — Page Position statements Continued Dairymen, Inc 109 National Cattlemen's Association 110 The National Council ofFarmerCooperatives 110 SD Livestock Auction Markets Association 113 Texas Cattle Feeders Association 115 Wisconsin BeefCouncil, Inc 117 WisconsinFederationofCooperatives 117 Letters ofsupport 118 Letters in opposition 129 AND BEEF AND DAIRY S. 1557 S. 1564 CHECKOFF PROGRAMS FRroAY, AUGUST 5, 1994 U.S. Senate, Subcommittee on Domestic and Foreign Marketing, and Product Promotion, of the Committee on Agriculture, Nutrition, and Forestry, Washington, DC. The subcommittee met, pursuant to notice, at 10:09 a.m., in room SR-332, Russell Senate Office Building, Hon. David L. Boren, Chairman ofthe subcommittee, presiding. Present or submitting a statement: Senators Leahy, Boren, Baucus, Feingold, Cochran, McConnell, Craig, Grassley, and Kohl. STATEMENT OF HON. DAVID L. BOREN, AU.S. SENATOR FROM OKLAHOMA Senator Boren. The committee will come to order. Today's hear- ing is intended to focus on both the beefindustry Long-Range Plan and proposed changes to the National Dairy Promotion and Re- search Board contained in Senate bill 1557 an Senate bill 1564. The subcommittee will examine how various organizations, pro- ducer members and checkoff contributors will be represented under the consolidation plan of the Beef Industry Council and the Cattle- men's Beef Board, the U.S. Meat Export Federation, and the Na- tional Cattlemen's Association. It is my understanding that the consolidation plan is aimed at making the beef industry efforts for promoting beef and research activities more efficient by reducing overhead and duplication be- tween the four groups who share similar interests. The net effect of the consolidation is intended to provide more money for market development, industry promotion and research, instead of over- head, salaries, and staffcosts. Because the plan proposes merging groups with separate mis- sions, and some have missions related to lobbying and others are primarily concentrated on market development and research, the subcommittee is interested in determining how checkoffdollars will remain separate from lobbying activities as required by the Beef Promotion and Research Act of 1985. I remember well the creation of the Beef Checkoff Program which has turned out to be one of the most successful programs of its kind in the country. This program has an exemplary record of complying with the terms ofthe 1985 Act. (1) In fact, the Beef Promotion Research Program was recently au- dited by the U.S. Department ofAgriculture and it passed with fly- ing colors. We will also solicit testimony on the effect of the industry con- solidation on State level promotion and research groups, because there is a very important relationship between the national effort and what is being at the State level. Our second panel will examine the effects oftwo bills. Senate bill 1557 and Senate bill 1564 and the Dairy Promotion and Research Program. Senate bill 1557, proposed by Senator Kohl is intended to provide for direct election of board members of the Dairy Pro- motion and Research Board. Currently nominations are taken for the Secretary of Agriculture for his appointment to the Dairy Board. And finally, the subcommittee will examine S. 1564, proposed by our Colleague on this committee, Senator Feingold, which would amend the Dairy Promotion and Research Program to ban block voting by cooperatives, assess defective imports of dairy products and sunset the promotion program to coincide with the reauthor- ization ofthe Dairy Commodity Program. I want to thank all of those who will be serving as witnesses today. We have an excellent cross section, I believe, of those that are impacted by this piece of legislation and by the consolidation plan and we look forward to hearing from all ofyou. I want to turn to my Colleagues first and ask if there are any opening comments that they would like to make. Senator Feingold. STATEMENT OF HON. RUSSELLD. FEE>JGOLD, A U.S. SENATOR FROM WISCONSIN Senator Feingold. I want to thank you, Mr. Chairman. I first thank the Chairman of the Full Committee, Senator Leahy, for his willingness to have this hearing and especially my friend and Chairman of the subcommittee, Senator Boren, for graciously agreeing to hold this hearing. The more senior Members can cor- rect me, but it is hard to imagine a busier time around here and it is very appreciated that the Chairman has taken the time to do this now. While it may appear that we are addressing separate and unre- lated issues today on the two panels, the Beef Promotion Program and the Dairy Promotion Program, I believe that the two issues really are quite related. They are both about accountability; they are both about producer representation; and they are both about equity and fair treatment for all farmers. To me the purpose ofthis hearing is neither to debate the effectiveness of these programs, nor to debate whether they should or should not be continued. I think that is up to the producers. We have called this hearing to pursue the question of whether changes in the respective programs are needed to address the three issues I just mentioned. Our first panel addresses them in the con- text of the beef industry's Long-Range Plan to unify the cattle in- dustry organization. Our second panel addresses those issues in the context of the various proposals to reform the National Dairy Pro- motion and Research Board, as the Chairman has said. Congress, at the request of agricultural producers, has created over 16 promotion and research programs for agricultural commod- ities ranging from limes to dairy products. The checkoff programs are designed to strengthen the respective product's position in the marketplace and to expand opportunities for farmers. In all cases, the programs are funded directly by all producers of the respective commodity. More importantly, however, the programs were de- signed to be operated and controlled entirely by the producers who foot the bill. They were also designed to ensure adequate represen- tation. Whether that is actually occurring, however, has come into question at least by some groups. That is a key point, because there is a lot ofmoney at stake here. Together the 16 promotion programs collect nearly $l-million-per year from farmers. The dairy and beefpromotion programs account for together nearly one-third of that entire amount. Dairy farmers pay over $225-million-per-year for State, regional and national pro- motion of milk and dairy products. The Dairy Board is the largest of the 16 commodity promotion programs with the beef checkoff being a close second, a collection roughly involving $80-million-per- year; and that one is from, of course, both cattle producers and farmers. daily "Wnen both cattle prices and milk prices are at their lowest levels in years as they are now and when the amount ofpromotion money in question is over one-quarter of a billion dollars, I think it is in- cumbent upon the lawmakers who authorize these programs to at least respond when producers raise concerns about the programs. And they have raised some pretty strong concerns. With regard to beef program, over recent months, I have heard from both beefand dairy producers across the country who are con- cerned about the beef industry Long-Range Plan that would unify the National Livestock and Meat Board, the Cattlemen's Beef Board, the Meat Export Federation, and the National Cattlemen's Association. I would like to take the opportunity provided by this hearing to address some of those concerns. They include such concerns as to whether it is appropriate for the Cattlemen's BeefBoard to consoli- date in any way with their largest contractors, the Beef Industry Council, the National Cattlemen's Association, and the Meat Ex- port Federation. I am also concerned about whether checkoff pay- ing producers will be well represented by the unified organization; whether all producers will be treated fairly under this reorganiza- tion; and whether it is appropriate for the Beef Board to establish a more formal relationship with a trade association that actively lobbies Congress and the administration, given that under the law, checkoff dollars cannot be used for lobbying or influencing govern- ment action or policy. These concerns raise the broader questions about the common practice of checkoff programs contracting with trade associations and whether there is an indirect and inappropriate subsidy pro- vided to those trade associations. This hearing will examine some of these issues, as well as the process that has been used to estab- lish the beefindustry unification proposal. Very briefly—, Mr. Chairman, as to the dairy portion, the same is- sues come up accountability, producer representation, and equity. And I think they are the key to the controversies that have sur- rounded the National Dairy Board for the last several years. The National Dairy Board has been one of the most controversial as- pects ofdairy policy in recent years. Producers have not only raised objections to the practice of cooperative block voting in producer referenda, a practice unique to the Dairy Board, they nave actually asked the practice to be prohibited. They have also suggested alternative reforms to the program which the Chairman alluded to, such as equal treatment of domes- tic producers with importers, so that we do not disadvantage our own producers relative to our foreign competitors. We have for years exempted the importers from assessments that we place on our own producers. The issue of regular Congressional review of the promotion program through the reauthorization process is an- other suggested reform. And finally, improved representation on the Dairy Board by establishing elected boards rather than politi- cally appointed members. As the Chairman has indicated, both I and my senior Senator from Wisconsin have introduced bills with regard to these issues and I understand Senator Kohl will be here at some point to present his proposals and concerns. From my perspective, I am still considering ways to improve the National Dairy Board and make it more accountable to producers. So my bill is not cut in stone; it is rather in a fluid development process, if you will. If what we learn today adds to the knowledge of some needed changes, I am happy to work with others to add additional items to the bill. On both panels we have both very knowledgeable and dedicated individuals testifying, all of whom care very deeply about these checkoff programs. I want to add to the Chairman's remarks, I am very pleased that you are all here and I know we can learn from your experience. I welcome you and I again thank the Chair. [The prepared statement ofSenator Feingold follows:] STATEMENT OF SENATORRUSSELLD. FEINGOLD I want to first express my thanks to my friend and Chairman, Senator Boren, for gsersasciioonu.slWyeagarleleihnagvetoahollotdotnhisouhreasrcihnegdudluesr,inbguta vIerayppbreucsiyatteimheisinretchoigsnilteigiosnlatthiavte the issues we are to address today are very important and are worth some of our time today. While it may app—ear that we are addressing separate and unrelated issues toda—y on our two panels the Beef Promotion Program and Dairy Promotion Program I believe thatboth matters before this committee today are quite related. They are both about accountability. They are both about producer representation. They are both about equity and fairtreatment ofall farmers. The purpose of this hearing is neither to debate the effectiveness of these pro- grams, nor to determine whether they should or should not be continued. We've called this hearing to pursue the question ofwhether changes in the respective pro- grams are needed to address the three issues ofaccountability, representation, and equity. Our first panel addresses them in the context ofthe beef industry's Long-Range Plan to unify the Cattlemen's BeefBoard, the Beef Industry Council, the Meat Ex- port Federation, and the National Cattlemen's Association. Our second panel ad- dresses those issues in the context ofvarious proposals to reformthe National Dairy Promotion and Research Board that have been suggested in the last year, including the initiatives contained in the S. 1564, the DairyPromotion Program Improvement Act of 1993 which I introduced last year and S. 1557 introduced by Senator Kohl. Overthe past 30 years Congress, at the request ofagricultural producers, has cre- ated a nuraoer of promotion and research programs Tor over —16 agricultural com- modities ranging from limes to dairy products. The programs known as checkoff