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Basically, the marketing business makes an application to the Agency for a tariff increase. That application is passed upon by the Rate Services Facilities Branch in Washington, D.C.
If the Agency does not accept an application for a new tariff, the marketing business has three choices:
The first choice is to stay with the tariff which it is on; the second choice is to stand on the tariff that the business is seeking to move to; the third choice, with respect to the letter, the quotation from Mr. Ringmeyer, would be to accept a per head tariff as a counter offer by the Agency
If the marketing business elects to stand on the tariff that it is moving to, the position of the Agency was to suspend that tariff for a total of 60 days per the provisions of the act, file an administrative complaint against the marketing business, and then hold a hearing before an administrative law judge on the concept of whether the schedule of rates and charges that the marketing business sought to implement would be just, reasonable, and nondiscriminatory.
After an administrative hearing is held, the administrative law judge will issue what is termed an initial decision and order. That initial decision and order is appealable to the judicial officer of the Department of Agriculture. The judicial officer has the final authority within the Department of Agriculture, to pass on administrative proceedings.
Once the judicial officer has issued his decision and order, the matter may be appealed to a U.S. Court of Appeals for the Circuit in which the marketing business is located. That is the situation that happened with the marketing businesses that were before us this morning, the Arkansas markets. Their appeal is in the U.S. Court of Appeals for the Eighth Circuit.
That is a brief outline of the procedure that is involved when the Agency makes a decision to take a marketing business to a rate hearing.
I would welcome any questions that I might answer with regard to my experience with the Agency or with the methodology that they apply in rate proceedings.
Mr. HIGHTOWER. Thank you, Mr. Koehler.
Mr. THORNTON. Only one question. I think Mr. Koehler might best answer: Have you heard it explained why the Agency insists upon the per head charge and rejects the commission method of establishing rates?
Mr. KOEHLER. Based on my experience in rate proceedings in which I have had occasion to listen to the testimony of Mr. Brinkmeyer in two separate proceedings, and to cross-examine him, that concept is a concept which has been held by Mr. Brinkmeyer since je joined the Agency in 1958. He is a career employee. And that concept was passed on to Mr. Brinkmeyer by his supervisor at the time he joined the Agency. And it has been his belief, and a belief of, I believe, a small number of personnel within the Agency, that a per head charge is the only charge which meets the language of the act when it speaks of a schedule of rates and charges that are just, reasonable, and nondiscriminatory.
In 1968 Mr. Brinkmeyer became chief of the rate services and facilities branch, and that is the branch that the gentleman spoke of this morning that consists of approximately four people who, in essence, pass on the applications of any marketing business, of any of the
2,000 or 1,900 marketing businesses across the country. These gentlemen are the ones that pass on the application as to whether they will accept or not accept that application for a change in tariff.
Mr. THORNTON. Thank you, Mr. Chairman.
Mr. HighTOWER. Thank you, gentlemen, very much. We appreciate your testimony. Thank you for coming.
We now ask Mr. George Hall to please come forward. Mr. Hall is vice president of Oklahoma National Stockyards.
STATEMENT OF GEORGE HALL, VICE PRESIDENT, OKLAHOMA
Mr. Hall. Thank you, Congressman Thornton and Congressman Hightower.
My name is George Hall, from Oklahoma City. I am vice president of Oklahoma National Stockyards. I thank you for the opportunity to appear here today on behalf of the American Stockyards Association, an organization that represents 25 of the major livestock markets in the Nation.
I commend you, Congressman Thornton, for your foresight in holding this hearing where we in the livestock industry can come and be afforded the opportunity to make our views known concerning H.R. 9482 and other bills that have been introduced by you and your fellow Congressmen.
We are in agreement with that portion of your bill which would restructure the rate supervisory authority of the Packers and Stockyards Administration. We believe that there is a need for the lessening of the level of regulation concerning a livestock market's charges to its customers.
We do take exception to, and hereby go on record, as having been opposed to that portion of your bill which would discriminate and limit the rate supervisory authority of the Packers and Stockyards Administration to those stockyards which either have: (a) an annual sales volume in excess of 100,000 animal marketing units, as determined by the Secretary of Agriculture; or (b) have an annual sales volume in excess of 20,000 animal marketing units, as determined by the Secretary, and are located more than 75 miles from the nearest independently owned and operated stockyard.
If this bill were to be enacted into law in the present form we understand that only approximately 120 livestock markets would continue to be subject to the ratemaking authority of the present act. This would be highly discriminatory against those successful markets which, by virtue of their size or location, would continue to be regulated by the present act.
I represent markets which, for the most part, have operated ever since the enactment in 1921 of the Packers and Stockyards Act. All of our rates and charges, regardless of whether they've been per-head or percentage, through the years have been subject to the supervisory ratemaking authority of this act.
Times have changed since 1921. No longer are the only livestock markets located at major railheads, as they were then. Now there are nearly 2,000 posted stockyards or livestock markets in the Nation. They effectively compete with each other for livestock business.
It is for this reason that we urge you, Congressman Thornton, to
amend your bill to include and allow all stockyards and livestock markets, regardless of size or location, to file schedules of charges, known as tariffs, without first securing the approval from the U.S. Department of Agriculture.
The competition existing between markets effectively monitors the rate levels of the markets. The very number of such markets insures the customer a choice at a price he is willing to pay.
I would urge you to incorporate in your bill the following safeguards for the benefit of our market customers:
(a) Any change in any charge should be published by posting for not less than 10 days at a market before going into effect, as at present.
(6) Any change in any tariff charge should be filed with the Packers & Stockyards Administration 10 days in advance of the effective date, as at present.
(c) The rates and charges of all commission agencies doing business at the same market should be identical, as at present.
(d) All tariff charges must be applied uniformly and without discrimination, as at present.
(e) The Packers & Stockyards Administration should continue to hear customer complaints and hold reparation hearings where necessary.
It is our opinion that the reduced level of regulation, when so achieved, will be of benefit to all segments of the livestock marketing industry. The customer will still be protected and a large volume of paperwork which is inherent to a request for a rate change will be eliminated.
Congressman Thornton, I commend you for your sponscrship of this bill. With the changes I have suggested to exclude all markets, regardless of size or location, from the rate regulatory authority of the U.S. Department of Agriculture then a great step has been taken in the deregulation of one vital segment of our free enterprise system.
Thank you, and I will answer any questions you might have. Mr. HIGHTOWER. Mr. Thornton?
Mr. THORNTON. We appreciate your very good testimony, and I must say that I was concerned at what level and how to draw a line between auction barns which are obviously of a highly competitive nature, small, not at all monopolistic in character, and any barns which I thought might exist—and I didn't know how many there might be, at Chicago or Kansas City that might still have an ability, through size and exclusiveness of territory, to have some monopolistic characteristics.
Are you saying that that line just can't be drawn, that there aren't any barns of a size or covering a wide enough area without competition that some regulation might be allowed on some of the very largest?
Mr. HALL. If I may, sir, use a personal situation. In Oklahoma we are the largest market, and in the Nation, the largest cattle market. And yet we have competition from approximately 40 smaller markets throughout the States of Oklahoma and in Arkansas, Texas, Kansas, all of which we consider our trade area.
I don't feel like that any of us need regulatory brothers looking over our shoulders to accomplish the job given the livestock producer to market his product.
If I may, sir, I would like also to say that we have an obligation as
livestock market to the livestock producer to be as efficient and as effective as we possibly can in the performance of services for him in the use of the facilities that we have.
I feel that we don't need that portion of the Federal Government under the Packers and Stockyards Act to control us, where we are managers ourselves. We need to take that into consideration as a manager of a market.
Mr. THORNTON. I very much appreciate what you've just said. I have never been among those who confused bigness with badness, and if competition exists, and if a monopoly is not present, then we ought to recognize that in the law.
On the other hand, if we still were living in a nation where there were only a handful of major markets and the circumstances were like those described this morning, in which the seller ships in cattle and the only persons there were the auction barn people and the purchaser, then that would be a circumstance in which some governmental intervention might be needed to avoid the effect of monopolistic condition.
Mr. Hall. I think this is absolutely true, your statement you just made. I would like to add one thing. Of these 25 markets that I represent, 20 of those do operate as auction barns. They have either 1 or 2 days, some as many as 4 days, of auction selling.
Again, a personal reference to the Oklahoma City yards, we operate 4 days a week. And 99 percent of the over 1 million head of livestock that goes through that market is sold at auction. So there's very little of the type of selling that was prevalent at the old terminal markets.
Again, this is in relation to the auction market method of selling.
Mr. HighTOWER. Thank you, Mr. Hall. We appreciate your testimony.
Now I'd like to ask Mr. Jim Sargent, of the Farmers Livestock Auction, Inc., Travis Justus, of the Arkansas Farm Bureau Federation, and Mr. Harold Henry of the H. R. H. Auction Co. of Hamilton, Mo., if you gentleman would all three take seats here.
Mr. Sargent, we'd be glad to hear from you at this time.
STATEMENT OF JIM SARGENT, FARMERS LIVESTOCK AUCTION, INC.
Mr. SARGENT. Congressman Hightower and Congressman Thornton; first of all, I would like to express my appreciation for you shouldering our burden, so to speak. I definitely appreciate the bill that you have introduced. The only thing, and I'll make mine very brief, the only thing that I would be in favor of in changing it would be to eliminate the size of the market.
Just like George told you there a minute ago, I think that a man that sells 10,000 head ought to be treated the same way as a man that sells 100,000. We sell in excess of 100,000 cattle a year. I do not feel like when by our efforts we have built this thing as large as it is that we should be jeopardized or put under any kind of a restraining order so to speak, different than a man that's selling 50,000.
Now I won't criticize the Packers and Stockyards Act. I think they have some good ideas. I think such things as your custodial accounts, your balancing of the scales, checking those, checking your books—İ think it's only fair to the consignor that he has some protection from
someone. It might not come from the Packers and Stockyards Act, but I think he is entitled to some protection.
But I do not feel like that they have any right to set your rates as to what you charge. I think competition of itself will do that if you're the kind of operator you should be. And if you're not the kind of operator you should be, you won't be there long anyway.
Gentlemen, again I would like to express my appreciation and thank you for your time.
Mr. HighTOWER. We appreciate your being here, Mr. Sargent.
STATEMENT OF TRAVIS JUSTUS, ARKANSAS FARM BUREAU
Mr. Justus. Mr. Chairman, Congressman Thornton; my name is Travis_Justus. I'm director, beef cattle division, of the Arkansas Farm Bureau Federation.
As you know, the Arkansas Farm Bureau Federation is a general farm organization made up of 76 county farm bureaus in the State, representing over 90,000 member families in the State of Arkansas, 25,000 of which produce or derive a major portion of their income from the sale of livestock. Our producer members have shown an interest in current developments regarding marketing changes and market charges, and the possible changes that could be coming forth in the regulation of those charges.
Livestock is a major source of income to many thousands of people in the State who need a dependable and efficient marketing system.
The livestock marketing sector, and particularly the auction market system in Arkansas, is of great importance and provides a needed and valuable service to our State's livestock industry.
This point is evidenced by the fact that approximately 90 to 95 percent of all cattle sold in the State of Arkansas goes through the auction markets. A similar high percentage of hogs and pigs marketed in the State are sold through auction facilities.
Not only do livestock producers rely on the livestock auction markets as an outlet for their products, but these markets also serve as a price-determining point for marketing transactions that occur outside regular marketing channels. They also provide a stimulus to the local economies of many of our rural areas in the State.
The necessity to keep market outlets for livestock or any other agricultural product operating in a climate of free and open competition is basic to the economic principles on which this country was founded, and is in the best interest of the producers, the market operators and the consumers.
While regulations under the Packers and Stockyards Act were promulgated to protect the livestock producers, such regulations should not be constructed or construed so as to hamper normal marketing practices nor to restrict or reduce marketing services provided by the various livestock market agencies.
The issue before us concerns a proposal to eliminate certain livestock markets from rate regulation under the Packers and Stockyards Act. We would agree with this amendent to the Packers and Stockyards Act on the grounds that our members have expressed deep concern with the degree of overregulation by Federal agencies.