Delegates Call For Cash Infusion, Market Accountability

Market reporting and price discovery rose to the top of pork producer priority lists during the Pork Industry Forum held in Nashville in early March.Pork Industry Forum encompasses the concurrent annual meetings of the National Pork Producers Council (NPPC) and the National Pork Board.Keying on the devastatingly low hog market of recent months, a record number 65 resolutions were presented to NPPC

Market reporting and price discovery rose to the top of pork producer priority lists during the Pork Industry Forum held in Nashville in early March.

Pork Industry Forum encompasses the concurrent annual meetings of the National Pork Producers Council (NPPC) and the National Pork Board.

Keying on the devastatingly low hog market of recent months, a record number 65 resolutions were presented to NPPC delegates for their debate and action. Nearly half of the resolutions dealt with mandatory price reporting, packer involvement in pork production or other marketing issues.

Capsulizing discussions and actions during the two-day event, delegates passed resolutions to reinforce key policy positions:

Delegates called for a one-time, direct cash infusion to help keep otherwise solid, efficient producers in business.

Delegates supported loan guarantee programs for both operating and ownership loans, including debt restructuring and interest rate buy downs.

Broad support endorsed some form of an ag safety net through fairer access to foreign markets, USDA study of an increasingly concentrated ag sector, plus administrative study of lending practices' contribution to ag sector concentration.

Delegates urged support of legislation requiring pork packers to report prices paid on all hogs, to USDA on a daily basis regardless of the purchasing method.

Delegates voted to form an industry task force to study the impact of the current pork industry structure, including hog ownership.

Resolutions brought to the annual meeting are compiled for state delegates in six broad categories to focus debate and foster consensus. Often, similar resolutions are filed by different states. Therefore, affirmative action on one resolution may set NPPC policy, preempting similar resolutions.

NPPC delegates spent the lion's share of their time on "public policy" resolutions aimed at the financial and marketing challenges facing by pork producers.

Public Policy Resolutions Delegates voted to support a direct, one-time-only cash infusion to help pork producers get back on their financial feet. Likened to a disaster payment, the resolution offered by the NPPC Board of Directors set a $50,000 per operation limit. All pork producers would be eligible for program payments, regardless of size. Payments would be based on total pig sales the last quarter of 1998.

Speaking in support of the cash infusion, Iowa producer Max Schmidt stated: "I realize that we have never gone to the federal government to ask for money. I don't relish doing that, but I don't think we should refrain from it either.

"I have been a pork producer for 33 years, and in 1998 I saw half of my equity go down the drain," he continued. "Think of the producers who have been in business half as long - they lost everything last year. If we're serious about keeping the independent pork producer around, we need to put our full support behind what the NPPC (Board of Directors) have designed here."

Illinois' Rich Brauer also lent support to the resolution, saying: "The first time I saw the resolution, I was a little concerned. But, then I realized what was involved here. Retail prices didn't go down. In effect, we created a lot of wealth but we didn't get our fair share of that wealth. A lot of people need this to continue farming. There has been a lot of equity lost."

And, Indiana delegate Keith Berry added: "It's not our nature to go to the government (and ask) to bail us out. But the government is not blameless in this whole situation." His list of government shortfalls included the inability to pass Fast Track Trade authority, a Hog & Pigs report that missed by a wide mark, and slaughter plants closing or operating at less than full capacity.

Ohio delegate Tom Pitstick reminded delegates that in addition to the cash infusion, the resolution supports a loan guarantee program. The rationale being that the loan guarantee concept would allow lenders to more objectively evaluate producers' portfolios, thereby allowing the market time to regain some balance and, hopefully, return to profitable levels. The resolution supports both operating and ownership loan guarantees, including debt restructuring and interest rate buydowns."While I recognize this is a change in approach for us (NPPC), I encourage the delegates to vote for it," he added.

The resolution passed soundly. Another heavily debated resolution outlined action aimed at providing pork producers and their communities with some sort of a safety net to protect their economic viability.

In concept, delegates supported a bill co-sponsored by Senators Kerrey-Daschle-Johnson (the Agriculture Safety Net and Market Competitiveness Act of 1999). However, they stopped short of giving the bill carte blanche endorsement through the resolution.

Kentucky delegate Dennis Liptrap summarized the consensus: "I have some difficulty supporting this specific of a bill with an official resolution. I think there are parts of this bill that we all endorse. I'd rather see us address those individually, rather than a resolution to support this specific piece of legislation. We certainly endorse the support of Senators Kerrey, Daschle and Johnson, and it may very well be a bill we could wholeheartedly support in its final form. But, to me, we tie the hands of our staff in Washington, and of ourselves, by passing the original resolution."

Liptrap then placed his support behind a substitute resolution presented by the Nebraska Pork Producers Association and the NPPC Bylaws & Resolutions Committee. The newly drafted and amended resolution carried these charges from delegates:

NPPC delegates support pursuing aggressive trade remedies that will provide U.S. pork with fair and meaningful access to foreign markets.

For USDA to investigate the effect increasingly concentrated sectors of agriculture have on rural communities and the general public.

NPPC urges Congress and the Administration to study whether public and private lending practices have contributed, or are currently contributing, to concentration in the pork industry.

The substitute resolution passed.

Also in the public policy arena, delegates passed a resolution directing NPPC to pursue a revenue assurance program for pork producers patterned after the crop revenue assurance programs currently available. And, they endorsed NPPC support for access to adequate debt capital for viable producers at fair market interest rates.

Marketing Resolutions Market issues and price reporting at all levels throughout the pork chain drew considerable discussion.

The most encompassing resolution was offered by the NPPC Board of Directors in an effort to represent a compilation of the seven state resolutions that focused on mandatory price reporting. The motion from board of directors' version, amended by delegates, reads: "That NPPC support legislation consistent with our policies on price reporting that requires all pork packers to provide, by plant, actual prices paid for all live hogs, by category, including contracts and formulas, for slaughter, on a daily basis. In addition, an improved retail price reporting system should also be included in the legislation."

This resolution represented a change in positioning by NPPC that has long held that a voluntary price reporting system could provide as good, or better, information than requiring segments of the pork chain to report prices. The board's turnabout was explained in the rationale, noting that a voluntary price reporting system had been designed and implemented, but that only one packer had participated. Consequently, the board altered their stance and began outlining an acceptable mandatory price reporting system.

When asked by delegates to provide an update on a bill drafted and being circulated in Congress, Gary Madsen from the NPPC Washington office responded: "Let's be clear about a couple of things. First, some form of mandatory price reporting will be approved and probably signed into law this year. We intend to be a player in that, based on the action of the board of directors, and if you should approve this resolution. It gives us additional support and strength to go forward and work with the process of developing meaningful legislation."

Iowa's Schmidt cautioned his fellow delegates: "Remember, we're adopting policy now, we're not trying to manage any particular bill. We have to decide what it is that we want, and let the legislative folks take care of delivering that.

"Our producers feel that for a given quality of hogs, there should be an open bid for anybody's hogs at that particular price, meeting that quality. We want this shroud of secrecy lifted, and (for) people (to) feel that they have access to those prices," he concluded.

Montana delegate Don Herzog added: "I think part of the rationale behind this resolution is to help us make better business decisions. I may not get the same price for the same hogs as some people. I just need to know that, so I don't stick a million bucks into something I don't have good information about. We're all professionals. The rationale here is - know where you are, on a competitive basis, so you can make better business decisions."

Keith Berry, a 120-sow, farrow-to-finish operator from Indiana, added: "I believe I can compete with the larger operations on a price per pound of pork produced (basis). My biggest concern is price discovery and market access."

His contemporaries agreed, passing the mandatory price reporting resolution soundly.

Three additional marketing resolutions dealt with the availability and transparency of marketing contracts.

On the transparency issue, producer concerns centered on those contracts that restricted freedom to discuss a contract with neighbors, lenders or legal counsel. The argument was that producers could not make good financial comparisons, therefore, good business decisions, when this information cannot be shared. Delegates passed a resolution favoring federal legislation that allowed production contract terms and conditions to be shared openly.

Availability of contracts was another sensitive issue. Because marketing contracts are becoming more commonplace, the secrecy associated with them and potential for preferential treatment for some raised additional concerns.

In the end, delegates passed a resolution encouraging USDA to require samples of all marketing contracts be filed with the Grain Inspection Packers and Stockyards Administration (GIPSA), and that the monthly filing of those sample contracts be made readily available to all producers for their review.

Another resolution concerned the current structure of the U.S. pork industry, and more precisely, packer ownership of hogs. Introduced by the Iowa Pork Producers Association, the resolution attempted to set limits on packers "owning, operating, managing or financing captive supplies of live hogs."

The resolution raised considerable discussion, amendments and challenges for interpretation and clarification of Section 202 of the Packers & Stockyards Act.

"From the Minnesota delegates' perspective, this is one of the four issues that, as delegates from our state, we have been sent here to discuss," stated Jim Quackenbush. "It looks like a runaway train, in some respects, and it's moving too fast for us to jump on. We want to slow it down a little bit.

"We, as producers, understand that we need coordination between production and packing-processing. But we need some kind of fair and equitable system that ensures that we're all given the opportunity to make a livelihood. That has to go both ways - the packer has to make a living and so do we. The concern I have is that we have several packers that seem to want to take over a large percentage of this industry. That's where I see the danger," he said.

Quackenbush offered an amendment to the resolution that would limit a company's captive supply of slaughter capacity to 5%. He justified the figure noting it would allow packers the opportunity to secure a portion of their slaughter capacity, yet still allow producers to get together and organize packing and processing if they wished. "It would limit the size of that (captive supply) so that everybody has an opportunity to be involved, yet we don't have the danger of one or two packers taking over the entire industry," he added.

More debate ensued, asking for clarification and interpretation of the Packers & Stockyards Act, whether captive supply meant packer ownership or if it included some of the marketing contracts.

In the end, delegates agreed that more information and study were required, therefore they supported a motion to form a task force.

The NPPC Board of Directors will appoint a task force to study the impact of the current hog industry structure and ownership of hogs, including the role of packers. The task force is to file their report with the NPPC Federation Council, which is made up of representatives of all of the state associations. The report is due in June, with a target date set to coincide with '99 World Pork Expo.

Indiana producer Kaye Whitehead encouraged the task force to include a Packers & Stockyards Act review as part of their report. A later resolution, directing NPPC to support a study by the General Accounting Office (GAO) or acceptable entity, to provide an interpretation of the current authorities of the Packers & Stockyards Act, also passed.

Science & Technology Resolutions Delegates took affirmative action in the following areas:

Support a science-based, coordinated, industry response to the issue of antimicrobial resistance from the use of antimicrobials in pork production, including producer education and reflecting measures appropriate for health and safety of the public.

Continue to work with state and federal animal health officials in the National Pseudorabies (PRV) Eradication Program, including long-range PRV surveillance to ensure eradication is complete by the end of the year 2000.

The new database from the Quality Lean Growth Modeling Project be used to update and implement new Fat-Free Lean Equations as the industry standard for estimating lean content in all U.S. grading systems.

Another resolution focused on continued research on stronger needles for everyday use in pork production, and to work with packers in the development of practical metal detection devices able to reliably detect metal in pork products.

Demand Enhancement Action to ensure fair and equitable trade between the U.S. and Canada received delegate approval. They also passed a resolution stating NPPC does not support mandatory "country of origin" labeling, as its value to the pork chain, to consumers, has not been proven.

Education/Environment/Production Delegate action encouraged leaders at all levels of state and national pork producer activities to participate in the On-Farm Odor/Environmental Assistance Program.

Delegates also passed a resolution directing NPPC to oppose new EPA regulations for propane storage. This was in response to a June 1996 published rule that requires producers storing various chemicals, including propane, to file a risk management plan by June 21, 1999. The rules affect any site with more than 10,000 lb. of propane (about 2,400 gallons).