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Sanders, Jim, Arkansas Cattlemen's Association, Little Rock, Ark., letter Page of March 8, 1978, to Hon. Ray Thornton.

95 Schloesser, A. C., director, Livestock Licensing and Weighing Division, Minnesota Department of Agriculture, statement--

92 Scott, John W., Master, National Grange: Letter of March 8, 1978, to Hon. W. R. Poage

100 Letter of March 16, 1978, to Hon. W. R. Poage--

102 Tucker, Hon. Jim Guy, a Representative in Congress from the State of Arkansas, statement





Fort Smith, Ark. The subcommittee was convened at 10 a.m., in the exhibit hall, Fort Smith Municipal Auditorium, Hon. Ray Thornton (acting chairman) presiding.

Present: Representative Jack Hightower.
Staff present: William A. Imhof, associate counsel.
Mr. THORNTON (acting chairman). The hearing will come to order.

On October 6, 1977, I introduced H.R. 9482, an auction barn rate reform bill to amend the Packers and Stockyards Act, 1921. My bill addresses that portion of the act intended by Congress to insure that public markets offer, and that livestock producers receive, services at charges which are reasonable for both the livestock producer and the auction market operator.

Unfortunately this is not how it has turned out in recent years for the small rural auction barns which compete aggressively with one another. They have recently been subjected to Federal regulation as public utilities, under which rates and charges can only be established after elaborate, lengthy and very costly Federal ratemaking proceedings. It is this issue of rate regulation which I hope to address today. I am gratified to see all of you with a stake in livestock marketing here to express your views.

(The bill H.R. 9482 follows:]

(H.R. 9482, 95th Cong., 1st sess.)

A BILL To amend the Packers and Stockyards Act of 1921 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 301 of the Packers and Stockyards Act, 1921 (7 U.S.C. 201), as amended, is amended by adding at the end thereof the following new subsection:

"(e) The term “animal marketing unit means one head of cattle, one calf, one horse, three hogs, or four sheep.'

SEC. 2. Section 305 of such Act (7 U.S.C. 206), as amended, is amended by adding the following new sentence at the end thereof: “For the purpose of carrying out the provisions of this Act with respect to the justness or reasonableness of any such rate or charge (or the method of computing such rate or charge), the authority of the Secretary is restricted to those rates or charges (or methods of computing such rates or charges) for stockyard services at stockyards which (1) have an annual sales volume in excess of one hundred thousand animal marketing units, as determined by the Secretary; or (2) have an annual sales volume in excess of twenty thousand animal marketing units, as determined by the Secretary, and are located more than seventy-five miles from the nearest independently owned and operated stockyard.”.


Mr. THORNTON. I am grateful to Chairman W. R. (Bob) Poage, chairman of the Agriculture Subcommittee on Livestock and Grains for scheduling this public hearing. Senator Dale Bumpers and Congressman John Paul Hammerschmidt have introduced companion bills, S. 2195 and H.R. 9639. These bills have generated a great deal of interest and to date over 30 Members of Congress have joined us in cosponsoring this legislation. I am particularly pleased to have Congressman Jack Hightower of Texas from the Subcommittee on Livestock and Grains with us today. Congressman Hammerschmidt is responsible for our being in Fort Smith and to him and members of his staff I want to express my appreciation for coordinating this hearing. I also want to thank Mr. Jimmy Charles of the municipal auditorium staff for his help. Mr. Tony Imhof, associate counsel of the Agriculture Committee staff is also present to lend assistance.

When the Packers and Stockyards Act was passed in 1921, the then-existing 71 terminal stockyards were in effect monopolies and, as such, properly amenable to regulation as public utilities. Congress, therefore, appropriately gave the Secretary of Agriculture extensive jurisdiction over their rates and charges. However, by 1958 livestock marketing patterns had changed and a great volume of livestock was marketed through smaller stockyards known as auction barns, which were not subject to rate regulation by the Secretary. In fact the industry had expanded to include some 1,980 auction barns. The vast majority of these can be classified as small businesses by any definition of the term.

Congress amended the Packers and Stockyards Act of 1958 to bring the rates and charges of these auction barns under regulation by the Secretary. Unfortunately, Congress did not at that time review the manner in which this jurisdiction should be exercised. This left in effect the rigid, public utility standards which were entirely inappropriate in the new competitive marketing circumstances.

The decentralization of livestock marketing has continued and today only some 25 to 30 markets are even arguably of the type which Congress considered in 1921 and subjected to regulation as public utilities. In many instances, competition for business between these auction barns is fierce and these facilities serve hundreds of thousands of livestock producers each year. During 1975, posted stockyards handled over 95 million head of livestock, valued in excess of $13 billion. For services rendered, producers paid $263 million as commission and yardage.

My legislation was introduced out of the realization that the burdensome and costly Federal ratemaking procedures and standards presently being imposed upon the auction barns will drive many of these needed markets out of business. The provisions of the Packers and Stockyards Act prohibiting discriminatory practices at all stockyards have served the small livestock seller and the industry well and are not disturbed by my bill. However, there is, in my judgment, no valid reason for the Secretary of Agriculture to continue to regulate the reasonableness of rates and charges at small rural auction barns.

The Packers and Stockyards Act requires that each stockyard operator and market agency operating at a posted stockyard file a schedule of rates and charges—tariffs—they will assess consignors.

From 1958 until recently USDA merely accepted and filed each small auction barn's rate schedules without lengthy hearings.

Their silence on the point carried with it the implication that the schedules were in compliance with the Packers and Stockyards Act. As a result, a fixed percentage commission—the most common rate schedule being 2, 3, or 4 percent-has been followed by a majority of small barn operators throughout the country. But two recent administrative decisions by USDA involving auction barns located in Texas and Arkansas have declared these small barns to be public utilities and a so-called cost of service or per-head rate has been imposed by the Secretary. In his decision relating to the Arkansas sale barns, the Secretary stated that constitutional safeguards against confiscation of property under the due process clause should not be extended to the auction markets. The Secretary also suggested that the Federal policy should be to drive the small auction barns out of business.

My legislation would lift the burden of public utility ratemaking standards from small locally owned auction barns but at the same time leave undisturbed the jurisdiction of the Secretary of Agriculture over the very large facility and the isolated facility at which there is no effective competition. The bill does not disturb the Secretary's authority over the reasonableness of rates at stockyards which either have annual sales volumes in excess of 100,000 animal marketing units or have annual sales volumes in excess of 20,000 animal marketing units and are located more than 75 miles from the nearest independently owned and operated stockyard.

I have been pleased that Mr. Charles Jennings, Deputy Administrator for Packers and Stockyards with USDA's Agricultural Marketing Service has met with my staff on several occasions to discuss Federal rate regulation policy. Mr. Jennings has been most cooperative and has agreed to hold a series of additional hearings around the country to receive feedback from individuals who cannot come to Fort Smith. These hearings will be conducted at Sioux Falls, S. Dak., Boise, Idaho; Fresno, Calif.; Amarillo, Tex.; Macon, Ga.; Índianapolis, Ind.; and Lancaster, Pa.

Today we are scheduling this first hearing, and have received a telegram from Congressman John Paul Hammerschmidt expressing his regret that he couldn't be with us today. He has asked that I read this telegram to the group:

Deeply regret that a combination of adverse weather conditions and an unexpected joint hearing of the House and Senate Veterans Affairs Committee to receive testimony from the Disabled American Veterans have prohibited me from joining you today. As you recognize, Ray, in that I am ranking Member of the House Veterans Committee, my attendance at this joint hearing is mandatory. I want you to know, however, that I appreciate very much your holding these hearings in Fort Smith. In view of your membership on the Agriculture Committee you are logically in a position to take the lead in this important Congressional inquiry aimed at removing detrimental federal regulations which are currently imposed on stockyards. I am already on record as having jointly sponsored legislation to this end, and I will continue my efforts to protect auction barns from being regulated into extinction. Please pass on to those in attendance at the hearing in Fort Smith my apologies for not being able to join them, and express my best wishes for a successful early resoultion of this problem. I would appreciate it if you would have the attached statement, which I had planned to make, entered into the record of the hearing at the appropriate place.

I have that statement here, and without objection this statement will be made a part of the record.


CONGRESS FROM THE STATE OF ARKANSAS In view of the importance of the livestock industry to citizens of the Third Congressional District in Arkansas, I am gratified that Fort Smith was chosen by the Agriculture Subcommittee on Livestock and Grains as the site for a field hearing to receive testimony on legislation to regulate sales commissions charged by stockyards.

I would like to take this opportunity to commend my colleague, Congressman Ray Thornton, for his efforts in arranging today's meeting. In that Congressman Thornton serves as a Member of the House Agriculture Committee it was both logical and desirable, in my opinion, that he was the Member to initiate this Congressional inquiry.

Although I do not serve as a Member of the Agriculture Committee, I have always maintained an active interest in matters involving this committee, especially those affairs which might affect farmers in Arkansas. In fact, in response to the problem this Subcommittee is now addressing, I joined in sponsoring legislation (H.R. 9639) which would lift the onerous and costly Federal ratemaking procedures and standards which are presently being applied to auction barns and which threaten to drive many of these markets out of business. In my view, these restrictive ratemaking procedures which served a legitimate purpose in the early 1920's are creating a damaging situation now that the livestock market has been decentralized.

I feel confident this forum will explore all the relevant facts in issue, and document the need for Congressional action to protect the small auction barn owner from antiquated and excessive regulation, and imminent extinction.

Lastly, I would like to personally thank the witnesses scheduled to appear before us for sharing their experiences and recommendations with the Livestock and Grains Subcommittee. Unquestionably, this panel will take these evaluations very seriously, and will give them foremost consideration.

Mr. HIGHTOWER. Mr. Chairman, I would like at this time move this statement and all other statements that may be submitted to the subcommittee within the next 2 weeks from this date be included as part of the record.

Mr. THORNTON. Without objection, it will be so ordered.

We have also received testimony in support of this legislation from Congressman Harold Volkmer of Missouri, and Congressman Jimmy Jones of Oklahoma, they've also called to express their regrets that they couldn't be with us today.

In addition, we have three statements submitted by people who could not be here to testify this morning:

Jack Shelton, of the Delhi Livestock Auction, Delhi, La.; Clifford and Dave Williams, of the Caldwell Sales Co.; and Glover Brothers, Union Stockyard, Pine Bluff, Ark.

Without objection, all of these statements will be included in the record.

[The statements referred to above follow:]


FROM THE STATE OF MISSOURI Thank you for the invitation to attend the Fort Smith hearing. I am sorry but I will not be able to attend as I have a seminar scheduled for that date.

I would however like to submit this statement. As I am a cosponsor of H.R. 9482, I agree with its intent. Yet, I feel that the legislation should go further to exempt all stockyards from USDA regulations on sales commissions. It seems unfair for the larger stockyards to be regulated while the smaller ones are free to set their own prices.

It is my belief that we should let competition play its role in regulating the stockyards. If a larger stockyard charges a price that seems unfair, then producers will take their livestock elsewhere. Therefore allowing the market place to be the regulator.

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