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problems is shifting over to a percentage tariff, the answer must be legislation rather than change of regulations? Mr. JENNINGS. Yes, sir, that is correct. Mr. HIGHTOWER. Mr. Jones, do you have some questions?

Mr. JONES of Tennessee. Mr. Hightower, I have no questions. There was a lull in the other committee meeting, and I wanted to come in and make my presence known and my interest known in what is going on here.

We are working on the budget over there, as you know, and we just voted out the credit bill a few moments ago.

I was privileged to have a few moments so I could leave and come over here.

It is delightful to have you gentlemen here. I know that we are going to be seeing some more of you later today.

May I say that I am most interested in the problem you are talking about. I produce livestock, myself, and my district is a livestockproducing district, so I am very interested in what you are talking about here today.

I know I am going to see Mr. Wilson later today.
Thank you, Mr. Hightower.
Mr. HIGHTOWER. Thank you, Mr. Jones.

Mr. Thornton, we have concluded the testimony and have had some response to questions. We would be happy to have your questions at this time.

Mr. THORNTON. Thank you very much, Mr. Chairman.

I want to compliment the witnesses for the testimony which I have read and which I think gives us a great deal of additional information to use as we consider this legislation.

I want to thank you for your courtesy in coming to Arkansas and conducting the field hearings there at Fort Smith.

Because of the hour, I will not ask any questions.
Mr. HIGHTOWER. Thank you, Mr. Thornton.

The committee staff may need additional information as we move along in consideration of this matter. We would appreciate it very much if they might contact you, Mr. Jennings, or your staff for additional information. At the same time, we may call on you or other witnesses to fill in some blanks in our understanding as we move along. We appreciate your cooperation in that respect.

I will repeat again that is it unfortunate that other committee hearings this morning were in conflict. I know that it is at considerable expense and trouble that you are here.

You have helped us by coming to testify. We are grateful for the fact that you have participated. Thank you.

At this time, the meeting will be adjourned. Whereupon, at 11:25 a.m., the hearing was adjourned.] [The extraneous material submitted to the subcommittee follows:



Mr. Chairman and members of the committee, I am a cosponsor of H.R. 9482, to amend the Packers and Stockyard Act of 1921 to better serve the needs of livestock sellers and stockyard operators in rural areas.

This legislation is necessary to relieve small competitive auction barns in my State of Arkansas from the burden of excessive federal regulation. Under current

law, rural auction barns are treated like public utilities with regulated charges. The bill we are recommending will establish an animal unit as one head of cattle, one calf, one horse, three hogs and four sheep. Weekly auction barns, that is, any barn that sells less than 100,000 animal units annually, would be exempt from federal regulation. If such a barn is more than 75 miles from a competing barn, the maximum number of head that could be sold free of federal intervention would be 20,000.

Let me briefly trace the situation that has necessitated this legislation action to secure a fair return on livestock sales by small rural auction barns. In 1976, auction barn managers in Arkansas were getting a 3 percent commission on gross sales up to $2,000 and 2 percent on anything over that. When labor costs increased from $2.30 to $2.65, the managers asked for a reasonable 1 percent increase in commission to cover their costs. Their costs. Their request was turned down by the Packers and Stockyard Administration which in turn proposed a national commission lower than the 3 and 2 percent combined rates. The USDA stated as part of the rationale for the low rate proposal the need to weed out livestock operators from what they described as an unfeasible market. An administrative law proceeding subsequently set a rate per head which is inadequate for meeting the actual operating expenses of weekly auction barns in Arkansas.

These auction barns in Arkansas have continued to operate on a percentage rate, but have been ordered by the U.S. Court of Appeals to hold in escrow the difference between the low rate per head set by the court and the percentage rate. This is an unsatisfactory approach which requires one particular operator in Arkansas to hold more than 51 percent of his commission in escrow, leaving him with no return on his investment.

This law was written in response to the stockyard situation in 1921 when there were 71 terminal markets in the U.S. Today, with over 2,000 terminal stockyards nationwide, the days of a natural monopoly for rural stockyards are over. The regulatory standards applied to public utilities are ill-suited to modern stockyards. The law must be updated to reflect current conditions.

We are not recommending changing the rules for large stockyards in major cities or in isolated areas which do, in many cases, operate without effective competition. But in rural areas with a number of auction barns in close proximity, rates that are fair to both the livestock producer and weekly auction barn operators would be best determined by the competitive forces of a free market system.

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My name is Al Schloesser. I am director of the Livestock Division of the Minnesota Department of Agriculture, and I sincerely appreciate the opportunity afforded me to share my views and opinions with this Committee. The primary purpose of these hearings, as I understand them, is to determine

just what the future rate-setting policy should be under the Packers and Stockyards Act at posted stockyards, but specifically as it relates to rural auction markets.

The Minnesota Department of Agriculture and the Packers and Stockyards AMS have jointly and cooperatively regulated the activities of persons engaged in the business of livestock marketing for the protection and benefit of the farmer and livestock producer. In my 27 years of experience with the State of Minnesota in administrative or service and regulatory work, I have had the highest regard for the work performed and the accomplishments of the Packers and Stockyards


Because of the heavy volume of livestock moving through interstate commerce, it is practical that a federal agency retain dominant authority; however, it is our strong feeling in the Minnesota Department of Agriculture that States have major input into the regulations that ultimately affect the citizens of the States. We must be particularly careful that in our search for change we do not undo the accomplishments of the past.

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We urge the continued filing of uniform and non-discriminatory rates and charges. By continued surveillance, the Packers and Stockyards AMS should require all tariffs be equitably applied as filed, without partiality.

In the case of auction markets, we favor the concept of letting competition
set the level of rates by permitting the filing of a tariff without
determining its reasonableness, after giving proper notice to livestock
producers. We think "adequate notice" should be emphasized by requiring
the tariff be publicized in the local media newspaper and farm periodicals
as necessary to get accurate information to the farmer. If livestock
producers file complaints alleging unreasonable or discriminatory rates,
or if at any time the Packers and Stockyards AMS has reason to believe
the rates are discriminatory or unjustifiable, it should intervene and set

equitable tariff to be charged.


It is important that a policy governing the filing of fees and charges at a public stockyard be retained. Buying and selling charges assessed by the market agencies, order buyers and dealers on a public terminal market should be the same.

The following figures reflect the number of head of the various species of
livestock marketed in Minnesota at the terminal market in South St. Paul
and at the rural auction markets during the year 1977. The transactions
conducted through livestock dealers or order buyers and the direct sales
to packing companies are not included.



1,328,450 64


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Because of the interest each State Department of Agriculture has in the welfare of its citizens, we would ask that a copy of each Minnesota tariff be filed with the Minnesota Department of Agriculture so it can properly respond to citizen questions or complaints.

We believe every buyer and seller of livestock is entitled to full disclosure of the tariffs, rates or charges levied against him for services; and these costs should be clearly reflected in the ACCOUNT OF SALE. Based on the kinds

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of complaints we receive in the Minnesota Department of Agriculture, it appears there are many misconceptions and misunderstandings among farmers regarding the facts of their livestock transactions. This prompts us, as a State regulatory agency, to renew our efforts informing farmers of the various selling options available to them and the degree of risk and costs involved.

The Minnesota State Livestock Weighing Program is one of the major functions of the Livestock Division, under my supervision, and dates back to the year 1919. It is designed to protect the farmer/producer and sellers of livestock from dishonest and unfair marketing practices by providing accurate, honest and impartial weighing of livestock by State Weighers who issue Official Certificates of State Weight on scales that are State-tested and inspected. All livestock weighed at the South St. Paul Public Stockyards and at four out-state packing companies are State-weighed. Our weighing fees are approved by the Minnesota Commissioner of Agriculture; and as any other registrant at the Public Terminal Market, the fees are approved by the Packers and Stockyards AMS.

Minnesota marketing facilities have a high volume of dairy cattle and calves; consequently more transactions, or smaller drafts of livestock, are necessary more so than in the western states. Therefore, a shorted weight on each draft represents a higher percentage of loss in weight than would be experienced in a large draft of feeder cattle or calves. Our weighing personnel equate their job to that of a bank teller making change in dollars and cents.

My reason for making these comparisons is to highlight an important point. Farmers and producers of livestock spend a great deal of time, effort and money getting their livestock ready for market; and only one mistake in marketing can make the difference between profit and loss. So then we begin to ask ourselves which regulation is more important than another? A farmer can conceivably lose money in various ways in any single livestock transaction. He may be shortweighted, docked, or the buyer may figure in a percentage of shrink, etc. Then again, he may give up his rightfu profit because of unreasonable service charges and rates. It doesn't make much difference what the cause the farmer is interested in the net figure on his check, and hopefully it is in the profit column.

We all know that in regulatory work we may never reach 100% of our goal, but I do believe the Packers and Stockyards - AMS has done a commendable and necessary job over the years. Whatever changes result from this hearing or legislation being considered in the Congress of the United States, the Minnesota Department of Agriculture urges the utmost cooperation between federal and state agencies in order to maintain efficiency and avoid duplication of effort as we pursue a common goal FAIR TRADE PRACTICES IN THE MARKET PLACE.

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