VALUE-ADDED CONCEPT

Here is how the value-added concept will work. It's very simple in that each purchaser deducts 0.3% of purchase price when he pays for the animal and that amount stays with the animal until slaughter.

For example, if a cow-calf operator sells a calf to a stocker operator for $100, the purchaser will deduct 0.3% or 30¢ when he writes a check. So the seller would actually receive $99.70.

Later, if the stocker operator sold the yearling to a feeder for $200, the purchaser would deduct 0.3% or 60¢. But the stocker operator collected 30¢ from the cow-calf man when the animal was purchased, so the stocker operator himself is contributing only 30¢ for the $100 value that he added.

Now, assume the feeder sells the animal to a packer for slaughter for $400. The packer will deduct 0.3% or $1.20 and remit it to the Beef Board. Each owner has paid his fair share on the animal, based on the value he added, but only the packer remits money to the Beef Board.

In all cases, whether the animal was sold at a public auction or by private treaty, the amount of the deduction would be entered on the bill of sale or on the check. This is the only record keeping that we believe necessary.

Because of the complex nature of the cattle business, enforcement of collections on intermediate sales-prior to sale at slaughter-would be very difficult. However, we believe that collection on intermediate sales would be self-policing, because the purchaser will have the law to back him up; he knows that later he will be required to pay the full assessment; and he will be looking out for his own business.

REFUNDS AND EXEMPTIONS

If any owner does not want to support the program or decides that he wants a refund, he can get it by writing to the Beef Board. The mechanics, which have been perfected in other checkoff programs, would be to write the Beef Board then would send him a form to be completed and returned, along with proof that the producer had paid the assessment for which refund is sought, within 30 days after the end of the month in which the sale of said cattle occurred. Then the refund must be made within 60 days after the request for refund is received by the Beef Board.

Breeding animals will be exempted from the assessment. The reason for this is that most breeding animals have a higher value when young; therefore, they do not fit the value-added concept. However, all breeding animals are eventually slaughtered, at which time the last owner would pay the assessment. Some questions have been raised regarding the definition of and designation of breeding animals; therefore, we request that this be left to the discretion of the Beef Board, with the approval of the Secretary.

Some consideration was given to exempting small cattlemen. This idea was rejected, however, for two reasons. First, all cattlemen will benefit from the program in proportion to the number of cattle that they own. Second, it is impossible to define a small cattleman, because many cattlemen trade in cattleone day they may own 50 or 100 head and the next day they may own none. In conclusion, the Beef Development Taskforce felt that this program should he broad-based, so that every cattleman pays his fair share, and that it should be simple simple to understand and simple to administer. We feel that the percentage assessment and the value-added concept accomplishes these requirements.

Thank you.

STATEMENT OF PAUL ROONEY, BEEF DEVELOPMENT TASKFORCE, SIOUX FALLS, S. DAK.

My name is Paul Reoney. I am a farmer and cattle feeder from Sioux Falls, South Dakota; past President of the South Dakota Livestock Feeders Association; Director of the National Livestock Feeders Association, and past chairman of the South Dakota Beef Council.

I am also a member of the Beef Development Taskforce and helped develop the proposed uniform collection plan for beef research and consumer information. It is in this capacity that I appear today.

I would like to explain some details of the plan relating to (1) how the funds are to be handled; (2) composition of the Beef Board, and (3) state beef councils.

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HOW THE FUNDS ARE TO BE HANDLED

Since these are producer funds, the Beef Board, to be comprised entirely of cattle producers, will have sole authority for collecting and administering the funds.

Under the value-added system, the collections stay with the animal until it is slaughtered. The last purchaser, which normally will be the slaughtering plant, is to deduct the assessment and remit it to the Beef Board. (According to the USDA, approximately 5,800 plants slaughter cattle in the U.S. Of these, 1,082 plants slaughter about 90% of the animals and locker plants slaughter the remaining percentage.)

If a plant is slaughtering animals on a custom basis, where it does not assume ownership of the animal, then the plant should collect the assessment on the basis of market value of the animal and remit to the Beef Board. In this case, the assessment likely would be listed on the statement to owner along with the processing charge.

The Beef Board would have an auditing staff to keep records of the incoming assessments and to deposit or invest the incoming funds (probably in shortterm certificates of deposit) until they are expended. The Beef Board would also have authority to examine the records of any slaughtering plant to assure that all assessments due from that plant are being are being remitted.

In addition, the U.S. Department of Agriculture would have authority to spotcheck slaughtering plants-to assure full and accurate remittance of fundsand would conduct an annual audit of the Beef Board to assure that the funds are being handled in accordance with the law.

The second major function of the Beef Board, after collecting the funds, will be to contract with other organizations to conduct the desired research, education, market development, etc. It may contract with one organization or several organizations, as the Beef Board sees fit.

While this contracting will be the exclusive responsibility of the Beef Board, we on the Beef Development Taskforce envision that, in order to make the funds go further, the Beef Board would contract with existing organizations, such as the Beef Industry Council of the National Live Stock & Meat Board, the National Dairy Council, state beef councils, state universities, private research organizations, consulting firms and other organizations. We do not feel that the Beef Board should be restricted to contracting with any specific organization or organizations, however, since the situation may change in time and its responsibility will be to get maximum value received for dollars invested.

To assure that the program is conducted in a manner and for the purposes spelled out in the Act, the Beef Board will submit an annual proposal of programs, with an accompanying budget, to the Secretary of Agriculture. The Secretary will have authority of approval only and cannot originate programs.

COMPOSITION OF THE BEEF BOARD

The Beef Board will consist of 68 members, all cattlemen. These members will be nominated by existing state cattlemen's organizations and appointed by the Secretary of Agriculture. Each major cattle state will have at least one representative on the Beef Board; and some states will have more, based on the cattle population in each state-one additional member for each three million head of cattle. (Because of low cattle population in some areas, the New England states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and Connecticut were combined into one unit; Maryland, Delaware and New Jersey were combined into one unit; Alaska was combined with Washington; Hawaii was combined with California.)

Because this is a rather large board, the Beef Development Taskforce envisions that its members would elect an Executive Committee to conduct the routine business. A large board was necessary in order to (1) give each of the major cattle states the representation they desire, and (2) give the larger states the additional representation they felt entitled to, on the basis that their financial involvement would be greater. This called for some compromises, of course, but we have discussed it with cattle industry leaders throughout the country, most of whom think it is fair.

STATE BEEF COUNCILS

At present, there are 28 state beef councils (17 legislated and 11 voluntary) for the purpose of beef promotion, consumer education and research.

The national program will not interfere in any way with state beef councils that now are in existence or that may be formed in the future. Since the existing state beef councils have done a good job with local promotion and education, and since some local promotion and education programs will always be needed. 10% of the total collections will be returned to states in proportion to cash receipts from beef cattle in each state. But most of the money will be invested in national programs where it will do the most good.

In conclusion, I would like to emphasize that these funds will be producer funds, which we producers expect to be discreetly invested for maximum returns. We believe that a Beef Board, comprised of leading cattlemen, will be capable of administering their own program efficiently and effectively, with a minimum of government regulation.

Senator LEAHY. Mr. Finney.

I have read through your statement, and I know there are some places where, again, we are going into the same areas. I will ask if it is all right with you, because your statement will be entered in the record in full, if you would emphasize the primary points, and also indicate if you have any disagreement in any area with the testimony that you have heard today.

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

STATEMENT OF WRAY FINNEY, FIRST VICE PRESIDENT, AMERICAN NATIONAL CATTLEMEN'S ASSOCIATION, FORT COBB, OKLA.

Mr. FINNEY. My name is Wray Finney. I am first vice president of the American National Cattlemen's Association. ANCA is the national beef cattle association representing more than 260,000 cattlemen, and representing all segments of the industry, whether they be in the breeders, the cow-calf producers, stock operators, or feeders.

I personally am a cow-calf and cattle feeder from Fort Cobb, Okla. I appreciate this opportunity to testify before the committee in support of S. 772. We, of course, just as many of the people that have testified before and will testify after me, express concern over the economic conditions currently-at least in the cattle industry-and we would offer in this bill for the industry, a self-help program, one that does not require any Government funding, with the exception of the one mentioned by the USDA.

We think that the proposal by the Beef Development Taskforce is a sound proposal, one that we can support fully, for several reasons. One is related to the consumer-market exploration. Consumers have always demonstrated a preference for beef, but there are many things we need to find out and determine, actual consumer needs and uses. For example, do they really want lean beef, or do they prefer the choice fed beef that we have available which is unique for this country?

Further, we think that there are many, many areas in product research and development that need to be explored. Consumers, in fact, ask me frequently what are the new methods of canning, or freezing, preparing and preserving of fresh meat?

And we also, I think, need to conduct nutritional research for our product. It was mentioned in the questions earlier the various healthrelated claims that are circulating around beef. We need to adequately fund research by emminent scientists to try to find the answers related to the so-called health and beef controversy.

We also feel that we need to develop further research, actual production research, on cattle and forage so we can economically and efficiently produce more beef. In our opinion, we have reached a plateau of research in this country. In fact, our industry faces a standstill in developing new means to increase cattle production and this comes at a time when Federal money is at a very low level, as compared to past, at least of the percentage of the total spent by the Government, which is very small in animal research, and we are presenting a program that we think will add impetus to the research program plus it has the added value that this money comes from the industry itself, and not the Federal Government.

We also need to find out the best possible means of moving the beef product from our point of production to the final area of consumer needs. There is seemingly some inequity, some inefficiency relating to the processing, the transportation, storage, and handling of beef.

As an example, USDA pointed out this past year that 80 percent of the increase in food prices in 1974 resulted from increases in costs related to processing, handling, and distribution, and they think that possibly if we could find better methods, we could decrease retail prices of beef by at least 5 cents a pound.

One other area related to foreign market development. I think this is one of the more critical needs of our industry. Cattlemen like to produce. The best time of the year for the cow-calf man, for example, is in the spring when his cows are dropping new calves. We like to produce at our full capacity, and in order for us to do this, I think we need to develop further markets. We need to get away from a two-tier marketing system that we currently operate in. We think in terms of domestic marketing, and foreign marketing as two separate things, but, in truth, our domestic production costs and prices are completely tied to the fluctuation in development and the world price situation, and we must become active in this system.

Of course, the benefits to the U.S. balance of payments, it goes almost without saying, would be favorable if we could develop the

markets.

Consumer education has been mentioned by the previous people that have testified. We would agree with what they have said. We think we do and must directly communicate with consumers, to help them develop the best diet possible, using beef as one of the bases, as they have demonstrated in the past, for their diet. We, as I said, feel that the market development plan as outlined in S. 772 is an excellent plan. We want this chance to do it ourselves. The American National Cattlemen's urges passage of this bill.

Mr. Chairman, I would be happy to answer any questions you might have.

Senator LEAHY. Thank you very much. Would the consumer education that would be funded under this go toward explaining and supporting the current change in beef grade standards, or would it stay neutral on that issue, or how would it

Mr. FINNEY. Well, I don't know that I can really answer that, other than it would be, as this becomes law and becomes a part of their method of purchasing beef, it would be a very advisable thing for consumers to be educated, and this would be an opportunity, certainly, to provide the funds necessary.

Senator LEAHY. You have heard the other questions that I asked here. Would your answers have been basically different on any of those issues?

Mr. FINNEY. No, sir, they would not. I might explain a little further, related to one question you asked, as far as consumer representation on the Beef Board. There has been great confusion among consumers themselves related to how beef is priced. Beef is not an added-on price situation. When I sell my cattle, I take whatever the market bears the hour of the day I sell my cattle, and I consider this program when there is a reduction in price, that I sell my animal for more of a contribution that only I make.

Now, we could get into the discussion of ultimately the consumer does pay the price, but I think they are going to buy beef anyway. To me, it is more of a deduction that I contribute and is never an added-on situation, even though we call this a value-added concept. For that reason, I think, for an example, I would have little opportunity in serving on the board of directors of a consumer-type organization. I also think it would not be to the best interests of the cattle industry in this country if consumers determine what we need in production research. The industry knows full well its own needs. There are eminent scientists who are available who can determine product research, and I really feel in agreement with Mr. Barron, and I would go even further, that I think the best method is this way, and then we could allow advisory committees to provide input to the decisions of the committee. I think that we could work together to come up with a real solid method of education and information for

consumers.

Senator LEAHY. Thank you. You are a cattleman of some standing, or you wouldn't hold the national position you now do. As a practical matter, would there be problems for a cattleman who consistently asks for a refund of the assessment?

Mr. FINNEY. It might be a slight inconvenience to him, but I don't see any problem whatsoever. It is all simply a matter of writing the Beef Board, a question of refunds.

Senator LEAHY. There would be no economic sanctions?

Mr. FINNEY. No, sir. Not to my knowledge, I see no way, in fact, for economic sanction.

Senator LEAHY. That was my next question. Is there any practical way that there could be any?

Mr. FINNEY. Then you would get into illegal activity, and I don't believe there is a possibility of it.

Senator LEAHY. Thank you very much. We appreciate your testi

mony.

Mr. FINNEY. Thank you.

[The prepared statement of Mr. Finney follows:]

STATEMENT OF WRAY FINNEY, FIRST VICE PRESIDENT, AMERICAN NATIONal CatTLEMEN'S ASSOCIATION, FORT COBB, OKLA.

Mr. Chairman and Members of the Committee, my name is Wray Finney and I am First Vice President of the American National Cattlemen's Association. ANCA is the national beef cattle trade association representing more than 260.000 cattlemen. I am both a cow/calf operator and cattle feeder from Fort Cobb, Oklahoma.