Statement of Paul R. Frischknecht
On behalf of the
American Sheep Industry Association
Before the
Committee on Agriculture, Nutrition, and Forestry
United States Senate
Washington, D.C.
June 22, 2005
Mr. Chairman and members of the Committee, on behalf of the nation's sheep industry, I am pleased to provide this statement regarding the Mandatory Price Reporting system for livestock.
As the national trade association for the United States sheep industry, our board of directors has established policy strongly supporting reauthorization of Mandatory Price Reporting (MPR). We urge the Congress to approve the reauthorization prior to the deadline this fall and we commit our resources to assist in any manner needed on this critical program.
The reporting details, process, and requirements for the sheep industry are by rulemaking of the U.S. Department of Agriculture. This has allowed our industry to work cooperatively with the Department since implementation in 2001 to modify and update the system. We have successfully made changes in the program with the most recent being the addition of wholesale prices of imported lamb, initiated in January of this year. This is an important benefit of MPR, not only to provide additional transparency to U.S. lamb meat markets but in fairness to U.S. companies that carry the expense of price reporting of American product, as now also do the foreign and domestic companies handling foreign lamb.
We therefore seek no changes to MPR in reauthorization but would ask every consideration of the Committee to reauthorize the study by the USDA Economic Research Service of the retail price series for lamb. This retail series of lamb prices has proven valuable to the American lamb promotion, research and information board in marketing campaigns. The retail series collected by the Department for lamb under MPR is the only avenue available to our industry. Prior to this study under MPR, retail prices of lamb meat had not existed since the Bureau of Labor Statistics ended retail reporting in the 1980's.
I add an observation from the perspective of industry regarding MPR in that from June 2002 through June of 2005 we have not witnessed the same level of price volatility in lamb that occurred under the voluntary reporting system. We cannot absolutely credit MPR yet, however it was reasoned in 1999 that MPR could reduce the extremes of price changes. All major lamb companies now report meat prices and in a more consistent manner. Under the voluntary system, some companies refused to provide price information or did so only selectively.
The implementation period of MPR in 2001 was chaotic in the U.S. lamb market with a collapse of live lamb prices in June of that year. It was November of 2001 before reports were regular in our industry and we caution the Committee that in the absence of reauthorization of MPR, we risk market disruption again should transition back to a voluntary system become necessary.
We applaud the Committee in conducting this timely hearing on a critical issue for the sheep industry. It is worthy to note that our association is also utilizing the database of prices collected under the mandatory system for a model that we have provided the Federal Crop Insurance Corporation to base a Livestock Price-Risk Protection Program for lamb. Without the price data collected under MPR, it would be very unlikely that we could seek a pilot program for price protection for lamb that has been implemented for beef and hog producers. The lamb industry in the U.S. does not have any price risk mitigation tools available today and this is a high priority of our industry.
Thank you for the opportunity to discuss this important topic.