Image of U.S. Rep. Jill Tokuda from U.S. House video livestream.

(BIVN) – The U.S. House Committee on Agriculture’s Subcommittee on Livestock, Dairy, and Poultry held a hearing on Wednesday, May 17th, reviewing “animal agriculture stakeholder priorities”. 

U.S. Representative Jill Tokuda (D, Hawaiʻi) had the chance to question witnesses on the challenges cattlemen face in Hawaiʻi’s 2nd Congressional District. She began her questioning with the following statement:

“I just returned recently from a trip back home to our second congressional district in Hawaiʻi. There I flew to five islands in five days, and met with agriculture ranchers, farmers, producers, stakeholders in some of our most rural and remote communities in our country. During a very candid roundtable with our Hawaiʻi Cattlemen’s Council, they shared with me the real struggles and harsh realities that they face. Some spoke openly about the ability for them to maintain a way of life that goes back generations for them. Being able to pass that on to their children, and how hopes were harsh as to that potential reality.

“Access to water, labor shortages, a lack of local processing capacity, inspectors, and transportation costs. We ship and fly cows – as some of you know – thousands of miles away to be finished and processed in the continental United States. There’s actually a plane that sits at the Kona Airport that only flies cows for finishing. And having more than 90% percent of cattle from Hawaiʻi sent to the continent for processing – only to come back to our islands more expensive than mainland or foreign beef for local consumption – is not sustainable from a food security, business, or environmental perspective. Furthermore, because of the limited processing capacity in Hawaiʻi, processing fees can be more than four times what they may be in the continental United States.”

“The rural communities of Indian Country face similar challenges,” answered Kelsey Scott, the Director of Program at the Intertribal Agriculture Council. “There’s estimations that the meat in some of our grocery stores, that could have been raised right out the back door, actually has traveled 1,200 miles in order to be in our grocery store shelves, available for purchase by our tribal members.”

Rep. Tokuda named the need for better infrastructure, upfront capital being less difficult for our smaller producers to come up with, and “technical assistance in ways that people can understand”, including broadband access which is “sometimes is hard for people to to get in remote areas” as some of the areas where Hawaiʻi ranchers could use help.

A summary of the “state of the cattle industry” in the U.S. was provided in this testimony by Todd Wilkinson on behalf of National Cattlemen’s Beef Association:

I. Current Cattle Market Conditions

Today, I am pleased to report that the state of the cattle industry has greatly improved. As we have further transitioned into a new phase of the cattle cycle, prices have significantly increased—and done so in a relatively short amount of time. Just last month, we set a record high spot futures price for Live Cattle, with the April 2023 contract hitting $175.50/cwt. For context, when I last testified on October 7, 2021, spot Live Cattle closed the day at $125.27. This upward pricing trend has been true across marketing methods (i.e., negotiated cash, formula, etc.) and classes of cattle (i.e., calves, feeders, finished steers and heifers, etc.). So far this month, USDA’s Livestock Mandatory Reporting (LMR) program showed a weighted average fed cattle cash price of $173.93/cwt. Again, in October 2021, that figure was closer to $122.55/cwt.

While the price environment for cattle has drastically improved over the past two years, the recovery has been bittersweet. The naturally occurring contraction phase of the cattle cycle, which we are currently experiencing, has been accelerated by severe drought experienced across the country. In fact, herd contraction has resulted in a year-over-year beef cattle inventory reduction of nearly 4% as of January 2023.1 There are currently about 89.27 million head of cattle in the U.S.—the lowest inventory in 61 years.2 Make no mistake: even amid a recovering market, cattle producers still face a myriad of challenges.

I would be remiss if I did not underscore that the entirety of the price improvement we are currently seeing has occurred without the enactment of market-altering legislation. Claims suggesting cattle market conditions would never again favor producers unless Congress intervened with massive government programs have been undeniably proven false. The market has unequivocally demonstrated it functions best when free from interference by federal planners—when cattle producers are at liberty to make economic decisions in the best interests of their unique businesses. To that end, NCBA has been clearly directed by its membership to maintain opposition to any bills which would limit their ability to market cattle in the way they see fit, and we call upon Congress to continue respecting their wishes.

II. Insufficient Forage Availability

Cattle producers are also experiencing substantially reduced access to forage. From persistent drought in the Midwest to record spring precipitation in parts of the Great Basin, grazing land is either mud or dust, and feed is more difficult to come by across most of cattle country. Tight land and hay supplies even further exacerbate forage costs and lease rates. While weather events cannot be controlled, the tools which producers utilize to respond to its effects can be. As I will explain later in my testimony, access to risk management tools and disaster indemnity programs is crucial to ensuring the strength of the livestock sector.

III. Rising Interest Rates

Economic headwinds, such as higher interest rates, continue to undermine producer profitability and the economic sustainability of rural America. Cattle producers rely on consistent, dependable access to credit to cover many different needs, from budgeted operating costs to unexpected events like emergency veterinary costs or rebuilding fence after a disaster. To cover these costs, many producers take out loans that are repaid after their cattle are sold. Unfortunately, for most of the year cattle operations define cash flow as money leaving the business instead of coming into the business. Access to credit allows cattle producers to purchase goods and services in their local market and support local businesses. While news of higher cattle prices is welcome, we are also the recipients of higher interest rates that result in larger loan payments, smaller profit margins for producers and less business activity for local economies. This is a situation that most producers know all too well.

IV. Surging Input Costs

The meteoric rise in input costs—despite strong and strengthening cattle prices—remains an immense barrier to producer profitability. Inflationary pressures continue to erode bottom lines on family farms and ranches across the country. Fuel, fertilizer, fencing materials, animal health supplies, and equipment prices are sharply higher across the board, and many of these cost categories have increased at a faster rate than cattle prices. Congress must seriously evaluate the extent to which federal policies have contributed to this unsustainable situation and, where appropriate, take the necessary steps to remedy it. Any solutions must be rooted in sound monetary policy and in accordance with the free-market principles which define the American economy.

V. Burdensome Regulations

Overly burdensome federal regulations also complicate producers’ ability to be profitable, undermining their ability to maximize their investments in all facets of sustainable operation. Whether it is uncertainty resulting from arduous livestock transportation requirements, compliance costs associated with the Biden Administration’s Waters of the United States (WOTUS) Rule, or land management restrictions resulting from unscientific influences in implementation of the National Environmental Policy Act (NEPA) and Endangered Species Act (ESA), cattle producers end up being saddled with the bill more often than not. Further compounding this problem is the unserious manner in which federal agencies calculate stakeholder compliance costs in their rulemaking analyses, often grossly underestimating financial burdens. At a time of great geopolitical uncertainty, the U.S. simply cannot afford to further burden food producers with massive costs and rules crafted by those farthest from the ground. As elaborated later in my testimony, overregulation must be addressed. Food security is national security, and the current regulatory environment jeopardizes the continued success of America’s farmers and ranchers—those on the front lines providing that food security.

VI. Summary

To recap, though challenges remain, I am optimistic about the state of the cattle industry. While cattle prices are reaching record highs, many producers are not able to fully take advantage of this welcome development due to increased input costs, climbing interest rates, and a web of regulatory red tape. In fact, several producers are analyzing these very risk factors and opting out while the going is good rather than investing with confidence in the growth of our industry. Going into a Farm Bill year and a new Congress, lawmakers can help those producers share my optimism by addressing several key issues.