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Getting Into the Meat of It: A Roundup of Livestock and Poultry Reform and Resilience Bills

November 14, 2022


The rising global tumult of the last several years – fanned by the COVID-19 pandemic and international conflicts – has had a myriad of consequences for our food system. One of the most prominent consequences has been the increase of food prices across the world. Among these increases, the price of some retail meats – which you find at a local butcher shop or supermarket – has risen well and above general inflation. Yet despite rising prices, many U.S. farmers and ranchers have seen relatively little, if any, increase – and in some categories a decrease – in their profit margins. 

So, where exactly is this money going?

In the modern era, consolidation in the food processing sector and specifically in the meat industry has been an issue since at least the 1970’s (further explained in our blog series here). While consolidation in the sector is not at all new, the COVID-19 pandemic, spiking inflation, international conflict, and heatflation have created circumstances for the remaining processors and vertically integrated food companies to claim that rising input costs are the reason for the rising price of meat. Yet, many agricultural economists note that this assessment is not fully accurate. While processors may often be paying higher labor costs for a variety of reasons, they are not paying much higher wholesale costs to farmers.

Fundamentally, food processing sector consolidation creates some efficiencies, but greatly diminishes the overall resilience of the sector, including the resilience of the farmers, ranchers, workers, families, and communities who depend on the sector for their livelihood. When timed with the rising food and specifically meat prices in recent years, the negative consequences of consolidation are on full display for all to see. This, in turn, has led to a long-overdue renewed interest in federal legislation that seeks to support farmers, ranchers, and small-scale independent meat processors, to create long term resilience in local and regional processing capacity. 

With the approaching 2023 reauthorization of the farm bill, there is a unique opportunity to reshape federal meat safety and processing policy in a more sustainable and resilient way in order to weather future supply chain disruptions. While not all needed improvements can be made through the upcoming farm bill reauthorization, it is nonetheless the next major opportunity and will serve as a continuing focal point of NSAC’s priorities. 

What follows is a roundup of federal legislation, some new and some old, that would positively impact meat production, processing regulations, and food safety inspection. Most of the bills are in response to the effects of consolidation across the meat industry, and how consolidation allows for upward price manipulation. NSAC has endorsed several of these bills, as noted below. 

Strengthening Local Processing Act – HR.1258/S.370 

The goal of the Strengthening Local Processing Act (SLPA) is to reshape current meat processing policy with an eye towards providing more resources to help small and very small  meat processing plants scale. The SLPA would increase funding for the development of small (under 500 employees) and very small (under 10 employees) processing plants, the states that inspect them, and the workforce necessary to sustain them.

The SLPA would increase the number of employees used to define the size of plants in the Poultry Products Inspection Act and the Federal Meat Inspection Act. It would further allow for a greater percentage (from 50 percent previously to 65 percent) of federal cost share to states that inspect and perform up to the same level of regulation for interstate cooperative shipment, and would provide greater reimbursement for inspections, from 60 percent to 80 percent. It also provides for size-appropriate hazard and critical point analysis across the breadth of the industry. Many smaller processors have noted the need for size-appropriate examples and HACCP guidance.

The SLPA would establish a Processing Resilience Grant program to bolster processing resiliency and development at the local level, via funding upgrades for small and very small plants. The SLPA would authorize $10 million per year in mandatory spending for the grants program, with up to an additional $10 million authorized through the annual appropriations process.

The plant infrastructure grant program is complemented by the creation of a new pipeline for workers through educational development grants, both for a range of educational institutions to provide workforce training, and to compensate small plants for providing this training themselves. The SLPA authorizes $10 million per year for each of these grants.

To date, SLPA has been referred to the agriculture committees in both the House and the Senate and has strong support across the aisle in both chambers of Congress, as well as NSAC’s endorsement. In the House, Representative Chellie Pingree (D-ME-01) continues to be a strong champion of this bill. Across Capitol Hill in the Senate, Senators Thune (R-SD) and Merkely (D-OR) have helped bring many of their colleagues onto the bill as well. 

Agricultural Resilience Act – HR.2083/S.1337

Led by Representative Pingree (D-ME-01) in the House and Senator Martin Heinrich (D-NM) in the Senate, the Agricultural Resilience Act (ARA) is a sprawling act that charts an entirely new vision for the sustainability and justice for our food system. This post focuses exclusively on the ARA’s processing provisions, but you can read more about the ARA in our Climate Policy Roundup and initial analysis in our press release. NSAC has endorsed the entirety of the ARA.

Two main sections of the ARA focus on meat processing and marketing. The ARA was the first legislation to introduce the idea of a Processing Resiliency Grant Program, that the SLPA (which was introduced more recently) now contains. As mentioned above, these programs would help bolster meat processing capacity in those plants best able to process a wide variety of livestock and poultry being used on sustainable, diversified farms. 

The second main processing section of the ARA includes provisions that push for clarity on animal raising claims for livestock and poultry. The current landscape is muddied as some claims have little to no regulatory verification, enforcement mechanism, or well accepted definition and can lead to confusion amongst consumers. The ARA would establish clear statutory definitions, verification methods, and marketing systems in order to promote transparency. 

Title V of the ARA includes a provision that would require USDA to develop rules for animal raising claims (like humane) and or diet claims (like grassfed). These would all be federal definitions and rules, though they could be verified by a third party if they meet the same minimum threshold as the government would follow for verification and enforcement of these claims. This section outlines fines for misuse of the claim, and other penalties. 

Processing Revival and Intrastate Meat Exemption Act HR3835/S.2001

The Processing Revival and Intrastate Meat Exemption (PRIME) Act – led by Senator Angus King (I-ME) and Representative Thomas Massie (R-KY-4) – would allow meat that is currently slaughtered under a custom exemption to be sold to more than a single customer as long as the processor is in compliance with any relevant state law. Under federal law, custom slaughter is exempt from inspection if the processing is only for the animal’s owner. 

The PRIME Act would expand this exemption beyond the immediate owner of the animal, allowing the sale of custom exempt meat directly to consumers, restaurants, or other retail establishments within the state. While expanding the custom exemption would likely make it easier for small producers to sell directly to consumers and even other small local establishments with greater ease, it is unclear what impact it would have on sales to larger institutions who often require USDA- or state-inspected meat as part of their contracts. 

Likewise, while the bill would lower the compliance burden for local processors and producers – it does not help them start or expand their business. So if PRIME passes but there are no size-appropriate loans or grants to allow small meat processors to exist, it might be challenging for processors to utilize this expanded exemption, even larger processors in the area that have much of their process already aligned with federal requirements.

It has been introduced and referred to committees in both houses, with strong support within Congress with 48 sponsors in the House and 7 in the Senate.  

Butcher Block Act HR. 7606

Introduced by Rep. Dusty Johnson (R-SD-AL) during the heat of the 2021 summer inflation, the aptly named Butcher Block Act passed the House in summer 2022 as part of the Lower Food and Fuel Costs Act. It has not yet moved within the Senate other than being referred to the Senate Agriculture Committee. 

The Butcher Block Act provides a suite of loans and grants for expansion of processing capability across the US. The bill would authorize an appropriation of  $100,000,000 for each of fiscal years 2023 through 2025 for guaranteed loans and authorize an appropriation of $20,000,000 for each of fiscal years 2023 through 2025 for grants. 

However, there is no size limit on either loans or grants in the Butcher Block Act, nor is there any directive to focus on minority owned establishments as exists in the SLPA. The act provides significant discretion to the Secretary to develop the application approval process and does not have a focus on small and very small establishments. Other than limiting the maximum amount of loan available to a single organization – $50 million for organizations generally, $100 million for cooperatively owned businesses – it is agnostic to size. 

The Act would limit funds from being directed towards partially foreign owned enterprises; any processing company that exceeds a 5 percent ownership by a foreign group is ineligible.

Meat & Poultry Special Investigator Act HR. 7606/S. 2036 

The Meat & Poultry Special Investigator Act was originally introduced concurrently with the Butcher Block Act, as a part of the Lower Food and Fuel Cost Act initiated near the peak of our current wave of inflation. It passed through the House as part of that act, and has continued to move through the Senate as its own bill in a way that the other parts of that package did not. In the House, Rep. Abigail Spanberger (D-VA-7) was a champion while Senator Jon Tester (D-MT) again was leading in the Senate, as he often does on many key agricultural issues. 

This bill seeks to create an office and position to enforce the Packers & Stockyards Act, to investigate any potential violations of anti-competitive behavior, and to coordinate with the Federal Trade Commission (FTC) and the Department of Justice (DOJ) to enforce violations. 

This bill follows increasing interest in the regulation and prosecution of anticompetitive behavior, and would give the government more teeth to operate under its existing authority to do so. 

When paired with capacity-building funding for smaller plants, regulation of oligopoly power and anti-competitive behavior can ensure a more competitive, fair, and resilient marketplace. 

Cattle Price Discovery & Transparency Act – HR.7639/S. 4030

Senator John Tester and Representative Cynthia Axne worked together over the last congress to introduce and build support for the Cattle Price Discovery and Transparency Act in their respective chambers. This bill could help level the playing field for smaller producers, who often have less resources to negotiate the complex marketing process associated with cattle ranching.

This act strives to clear up murky industry practices in the cattle industry, such as practices that allow processors to exploit a knowledge difference that only they can have as a central part of the industry. This practice allows aggregators to manipulate cash markets and alternative market agreements (AMA). AMA is a lump sum term for a variety of practices that keep cattle out of cash markets but generally is used in regards to purchase contracts agreed to ahead of time and partially based on cash market price. 

Currently, large processors control upwards of 80 percent of the market, which increases their ability to hide pricing agreements via AMAs whereas everyone involved can see potential prices in auction or cash markets. Likewise, these auction prices are often tied into different types of formula pricing (x percent of this price means you get x at sale) for the AMAs. This arrangement is likely creating a scenario where large packers and processors are able to manipulate both cash markets and the price paid via AMAs by increasing or decreasing the amount of cattle being fed into live markets when it is advantageous to lower the price for them to do so. 

This bill would set regional price standards between producers, packers, and processors that would essentially establish a framework within which AMAs would be reported in a contract library, allowing for producers to have knowledge of industry price trends for AMAs. It would also create a better reporting process for the amount of cattle slaughtered daily, and for reporting daily cutout yield statistics as well. All of this is information that large packers would have to supply to the USDA who would then report it. This information would reduce the information asymmetry between producers and packers, and perhaps help ranchers achieve higher prices.

Small Family Farmers & Ranchers Relief Act (SFFRRA) H.R. 8590

Recently, in an effort to support small ranchers and farmers, Representative David Scott (D-GA-13), Chairman of the House Agriculture Committee, introduced this bill. It provides a variety of ways to help farmers and ranchers who have less than 100 heads of cattle in a way that none of the other bills discussed above do. 

SFFRRA lowers cattle insurance premiums for smaller producers by 2-25 percent, depending on the history of the specific small producer, with greater premium coverage reserved for small, beginning, and veteran farmers. 

The bill also includes a statistically based price support. When the farmer’s share represents less than 51.7 percent of the spread (the difference between the retail value and farmer-wholesale price), a payment of the difference between the current spread and the 80th percentile of the the 10 year rolling average spread will occur for every animal sold up until the 100th head.

Finally, this bill creates a grant program with maximum grant awards of $500,000 and significant discretion for the farmer to decide how to spend the funds. From land to processing equipment, this act is designed to allow farmers, who understand their own operations best, to utilize the grants how they see fit to help reshape the meat policy landscape. Because of the maximum grant size; the focus on small, beginning, and veteran farmers; and the interest in farmer choice around use of the grant, we believe this bill could be helpful in expanding markets and processing capacity for more sustainable ranchers. 

This bill was introduced before the August recess and referred to the House Agriculture Committee, though it has seen no further action since that time. This bill will hopefully garner support on its key provisions before the end of the year. 

Roundup

NSAC strongly endorses the Strengthening Local Processing Act as a central vehicle for transformation of the livestock industry given its comprehensive approach and equity focus. While the other bills would open new small markets, create better rules of the game, or solve a myriad of other issues, we believe that the SLPA addresses some of the most important issues at the heart of the industry.  Size-appropriate infrastructure, technical assistance for plants, and funding to develop a skilled workforce are all critical needs acknowledged across the industry. Building out plants that allow for smaller, diversified farms to market their livestock, improve their soil health, and improve their bottom line is a key component of creating a more sustainable food system. The parts of the ARA that mirror the SLPA and all of its provisions would help improve the marketing and production of sustainably raised livestock.

Many of these bills will help bolster other parts of the industry, including marketing of livestock products from smaller processors and producers.  NSAC looks forward to their continued development over the upcoming Congressional session, and their reintroduction in the following session. Specifically, the Butcher Block Act, if targeted more precisely towards smaller plants, and the Small Family Farmers & Ranchers Relief Act, if expanded beyond cattle, would be welcome additions to smaller-scale sustainable producers and the processors that work with them.


Categories: Carousel, Food Safety, Sustainable Livestock


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