STATEMENT OF

TEXAS & SOUTHWESTERN CATTLE RAISERS ASSOCIATION

The Texas and Southwestern Cattle Raisers Association, with head

quarters in Fort Worth, Texas, is a cattle producers organization which is composed of approximately 14, 000 members, living principally in the states of Texas and Oklahoma.

We appreciate the opportunity to present the position of Texas and Southwestern Cattle Raisers Association today at this hearing, in regard to the rate policies under the Packers and Stockyards Act, and recommend eliminating regulation of rates and charges.

We understand that one of the principal aims of the Packers and Stockyears Act, as passed in 1921 and now amended, is to make certain that livestock producers selling livestock at public markets receive reasonable services and facilities for a just and nondiscriminatory charge. It should be noted that when the Packers and Stockyards Act was passed in 1921, there were only approximately 75 stockyards in the entire United States, as compared to the present number of over 2,000 posted stockyards regulated under the Packers and Stockyards Act. It is obvious that these markets are far more competitive with one another than in 1921; yet, the rate-making procedures have not been changed. Reliable data now indicates that today, livestock markets handle less than 45 percent of all livestock volume and merchandising transactions. strongly suggests that the monopolistic tendencies which brought about the Packers and Stockyards Act no longer exist and rate regulation is no longer required.

This

As further evidence of the keen competition existing in the livestock marketing sector of our country, there are presently over 14,000 registered livestock dealers and a variety of other means are available to producers in marketing livestock by order buying firms, cooperatives, and through direct sales to packers and feedlots. These alternatives are all in addition to marketing through the posted livestock market or stockyard as we know it.

The policy of Texas and Southwestern Cattle Raisers Association generally stands upon the prinicple of reducing Government intrusion into the lievstock business. We believe the Packers and Stockyards regulatory people can use their time and direct their energies and resources more productively in other areas of their regulatory duties if freed of the time-consuming responsibility involved in setting rates and charges and adjusting them periodically for the more than 2,000 posted markets in our country.

Texas alone has approximately 180 posted livestock markets selling cattle each week at the present time, and we feel that this highly competitive situation will keep rates reasonable and equitable.

As previously mentioned, the livestock producer has a wide variety of marketing alternatives available to him in addition to selling his livestock at a posted livestock market. Therefore, we believe and suggest that the best interests of buyer and seller alike may be better served by eliminating regulation of rates and charges by the Packers and Stockyards Administration, and focusing a greater concentration of effort on other areas of their responsibilities in safeguarding our industry from

unfair and deceptive trade practices.

Your consideration of the position of this Association will be appreciated.

Mr. HIGHTOWER. Mr. Jennings, I did not get to hear your entire testimony.

I am not sure that I exactly understand what the position of the Department is. I gather that your statement is that the Packers and Stockyards Administration would oppose this legislation in its deregulation aspects and commit, in a sense, to bring about deregulation, or partial deregulation, administratively. Is that correct?

Mr. JENNINGS. Yes; that is correct, Congressman.

We do plan to issue a policy statement within the next 2 or 3 weeks— as quickly as possible.

Mr. HIGHTOWER. Would there be a size limitation as to the effect of the deregulation-as to the size of the stockyard or the number of animal units that would be affected?

Mr. JENNINGS. No, sir, there will not. It would apply to all markets. Mr. HIGHTOWER. It would be clear, across the board? Whatever regulations you impose, or whatever deregulation is brought about, would apply to large and small as well?

Mr. JENNINGS. Yes, sir.

Mr. HIGHTOWER. I have some concern about that. This position was also taken by Mr. Jones that it might be best to approach the problem administratively.

In my brief experience, I am a little apprehensive about commitments at any level of bureaucracy that they are going to change the established procedure just as soon as they can get around to it. The problem there is that sometimes getting around to it is delayed, and anything that can be changed administratively can also be changed back administratively.

As we all know, these offices and the personnel that occupy them change from time to time. Their points of view and philosophies change sometimes not as much as we had hoped-but they can change, and if you can deregulate, you would still have the power to regulate again. Is that not true?

Mr. JENNINGS. Yes, sir, I think that is correct.

Mr. HIGHTOWER. Do you think from the standpoint of desirability that the effect on the marketing of livestock ought to be the specter of utility-type regulation hanging over them if they do not do what what someone in Packers and Stockyards or the Department of Agriculture wants them to do?

Mr. JENNINGS. I referred earlier to the series of hearings we have just conducted throughout the country-seven of them, to be exact. There was a very strong indication there that if we do deregulate, there will be some increases in tariffs. At the same time, there was some concern expressed by some ratepayers that if we deregulate it might cause some problems on their part and the amount of fees they would be required to pay for the selling services performed for them. We like to subscribe to the theory that competition will hold these rates to a reasonable level. We are most hopeful that they will be held reasonably.

Mr. HIGHTOWER. Is the Packers and Stockyards Administration to be the judge of the reasonableness of these?

Mr. JENNINGS. No. Our proposal will be that whatever rate anyone wants to put into their market we would approve of and take no action concerning that in the absence of valid complaints from ratepayers.

The only thing we would be doing would be retaining the right to respond to complaints if they are forthcoming from a ratepayer.

Mr. HIGHTOWER. How would you respond? What would be the nature of your response to the rates?

Mr. JENNINGS. An investigation would be made of their rates to determine whether or not there was validity to the complaint, whether or not the rates were unreasonably high.

Mr. HIGHTOWER. And the test for that would be what?

Mr. JENNINGS. A reasonable return on investment plus an allowance for all business expenses plus compensation for the services performed by the owners. If it greatly exceeded reasonable figures there, then I presume we would be in a position to take action against them.

Mr. HIGHTOWER. Then it would not matter what the other markets in the surrounding areas were getting or doing or how they fit into this, if it should be determined by P. & S. that, in their opinion, it was unreasonable as it applied to that particular stockyard, and it would be changed. Is that correct?

Mr. JENNINGS. I think it would apply equally to all markets. We would not single out one market to make an example of them.

Mr. HIGHTOWER. But if you singled out one, you might start a domino effect all around. The changes you imposed with one would dictate changes to others. Would it not?

Mr. JENNINGS. I think it would. I think that could happen, yes, sir. Mr. HIGHTOWER. So we would just be getting back onto the merrygo-round of regulations.

Mr. JENNINGS. I hope that does not happen Congressman.

I have just come from the livestock marketing industry, myself. I think I understand it far better than a lot of people do. I have every hope that there is sufficient competition between these markets that they stay at a reasonable level.

Very frankly, I am the one who proposed some deregulation. I am the one who suggested we hold these hearings to get input from the industry. I am quite pleased with the response to those hearings.

Mr. HIGHTOWER. I do not really want to prolong it, and I am certainly not trying to debate you on the issue. I am concerned that if we say regulation is bad and we ought to deregulate, why do we not take away the statutory authority rather than holding it in abeyance? Maybe we ought to direct that to Mr. Jones.

Mr. JONES. Mr. Hightower, we have a reluctance at this point in time, No. 1, to open up the act. You will recall the actions that we went through during the time that we made the prompt payment trust provision amendments. You were very instrumental in that legislation. We e now have some very good machinery to assure payment of livestock, and we know that everyone involved is not particularly happy with the bill.

We would be reluctant to see the act opened up.

Mr. HIGHTOWER. For fear of some other amendment that might come in that would upset another aspect of the marketing?

Mr. JONES. That is correct. Or at least an attempt would be made. Very frankly, at this point, I guess we can say we are reluctant to take that risk.

The second thing is that the more at the time for deregulation has come about not because of a change of people or administrations. It

has come about, pretty much, because of the atmosphere and attitudes that now exist in the country.

Therefore, we feel that this will be a lasting of action. As ratepayers, we do not fear the risk of getting on a yoyo of being on regulations or not being on them.

We think this can be done administratively and that the Department would not be in a position to be very arbitrary in whether it came back to inflict regulation. After all, we would have to go through again giving the public an opportunity to have a word, and the industry certainly would come forth and speak its voice. So we do not have that particular fear.

In view of that, in view of our attitude toward opening up the act, we would just prefer to see it at least try to be done administratively on the first round.

Mr. HIGHTOWER. Mr. Jennings, do you believe that enactment of this bill could encourage a larger and more profitable stockyard to cut its fees in an attempt to shut down smaller barns? That deregulation would have that effect?

Mr. JENNINGS. This particular bill? No; I do not see that this bill would encourage that type of thing.

Mr. HIGHTOWER. What procedure does a sale barn go through when it applies to P. & S. for a rate increase and is turned down?

You have heard these witnesses here. There is some dissatisfaction. We heard it also in Fort Smith that one of the problems was that when they tried to get P. & S. to look at their problem, they finally just gave up because they could not get any response. Ultimately, many of them closed out.

What is the procedure?

Mr. JENNINGS. First of all, I think those that have that type of complaint must be referring to the time prior to the time when I was first brought into this Agency some 7 or 8 months ago.

The ones who are being turned down since I have been here are those that are on a percentage tariff. The reason they have been turned down is not based on whether or not they are entitled to an increase, but rather on the fact that percentage tariffs have been held to be illegal by both the judicial officer and now the eighth circuit has upheld it. We have no alternative, other than to turn down a request for an increase and a percentage tariff.

Mr. HIGHTOWER. If we deregulate by regulation, what effect is that going to have on this eighth circuit opinion?

Mr. JENNINGS. That does not touch that particular problem at all. It has no effect on it except indirectly. If we no longer pass on the level of rates, then I think many of those that are on a percentage tariff would find it more advantageous and be more willing, hopefully, to convert to a per-head charge.

To authorize the use of percentage tariffs, in the face of the court decision, would require legislation.

Mr. HIGHTOWER. If the Thornton bill is passed, would that not make it possible for the stockyards to impose percentage tariffs?

Mr. JENNINGSs. Yes; it would.

Mr. HIGHTOWER. And it would override the eighth circuit opinion? Mr. JENNINGS. Yes; it would do that.

Mr. HIGHTOWER. So really, if they believe that the answers to their