To amend the Agricultural Marketing Act of 1946 to increase competition and transparency among packers that purchase livestock from producers.

February 6, 2003

Mr. GRASSLEY (for himself and Mr. FEINGOLD) introduced the following bill; which was read twice and referred to the Committee on Agriculture, Nutrition, and Forestry

To amend the Agricultural Marketing Act of 1946 to increase competition and transparency among packers that purchase livestock from producers.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SPOT MARKET PURCHASES OF LIVESTOCK BY PACKERS.

Chapter 5 of subtitle B of the Agricultural Marketing Act of 1946 (7 U.S.C. 1636 et seq.) is amended by adding at the end the following:

`SEC. 260. SPOT MARKET PURCHASES OF LIVESTOCK BY PACKERS.

`(a) DEFINITIONS- In this section:

`(1) COOPERATIVE ASSOCIATION OF PRODUCERS- The term `cooperative association of producers' has the meaning given the term in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).

`(2) Covered packer-

`(A) IN GENERAL- The term `covered packer' means a packer that is required under this subtitle to report to the Secretary each reporting day information on the price and quantity of livestock purchased by the packer.

`(B) EXCLUSION- The term `covered packer' does not include a packer that owns only 1 livestock processing plant.

`(3) NONAFFILIATED PRODUCER- The term `nonaffiliated producer' means a producer of livestock--

`(A) that sells livestock to a packer;

`(B) that has less than 1 percent equity interest in the packer, which packer has less than 1 percent equity interest in the producer;

`(C) that has no officers, directors, employees, or owners that are officers, directors, employees, or owners of the packer;

`(D) that has no fiduciary responsibility to the packer; and

`(E) in which the packer has no equity interest.

`(4) SPOT MARKET SALE-

`(A) IN GENERAL- The term `spot market sale' means a purchase and sale of livestock by a packer from a producer--

`(i) under an agreement that specifies a firm base price that may be equated with a fixed dollar amount on the date the agreement is entered into;

`(ii) under which the livestock are slaughtered not more than 7 days after the date on which the agreement is entered into; and

`(iii) under circumstances in which a reasonable competitive bidding opportunity exists on the date on which the agreement is entered into.

`(B) REASONABLE COMPETITIVE BIDDING OPPORTUNITY- For the purposes of subparagraph (A)(iii), circumstances in which a reasonable competitive bidding opportunity shall be considered to exist if--

`(i) no written or oral agreement precludes the producer from soliciting or receiving bids from other packers; and

`(ii) no circumstance, custom, or practice exists that--

`(I) establishes the existence of an implied contract (as determined in accordance with the Uniform Commercial Code); and

`(II) precludes the producer from soliciting or receiving bids from other packers.

`(b) GENERAL RULE- Of the quantity of livestock that is slaughtered by a covered packer during each reporting day in each plant, the covered packer shall slaughter not less than the applicable percentage specified in subsection (c) of the quantity through spot market sales from nonaffiliated producers.

`(c) Applicable Percentages-

`(1) IN GENERAL- Except as provided in paragraph (2), the applicable percentage shall be--

`(A) in the case of a covered packer that is not a cooperative association, 25 percent; and

`(B) in the case of a covered packer that is a cooperative association, 12.5 percent.

`(2) EXCEPTIONS-

`(A) COVERED PACKERS WITH A HIGH PERCENTAGE OF CAPTIVE SUPPLY CATTLE- In the case of a covered packer (other than a covered packer described in subparagraph (B)) that reported to the Secretary in the 2001 annual report that more than 75 percent of the cattle of the covered packer were captive supply cattle, the applicable percentage shall be the greater of--

`(i) the difference between the percentage of captive supply so reported and 100 percent; and

`(ii)(I) during each of calendar years 2004 and 2005, 5 percent;

`(II) during each of calendar years 2006 and 2007, 15 percent; and

`(III) during calendar year 2008 and each calendar year thereafter, 25 percent.

`(B) COOPERATIVE ASSOCIATIONS WITH HIGH PERCENTAGE OF CAPTIVE SUPPLY CATTLE- In the case of a covered packer that is a cooperative association and that reported to the Secretary in the 2001 annual report that more than 87.5 percent of the cattle of the covered packer were captive supply cattle, the applicable percentage shall be the greater of--

`(i) the difference between the percentage of captive supply so reported and 100 percent; and

`(ii)(I) during each of calendar years of 2004 and 2005, 5 percent;

`(II) during each of calendar years of 2006 and 2007, 7.5 percent; and

`(III) during calendar year 2008 and each calendar year thereafter, 12.5 percent.

`(d) NONPREEMPTION- Notwithstanding section 259, this section does not preempt any requirement of a State or political subdivision of a State that requires a covered packer to purchase on the spot market a greater percentage of the livestock purchased by the covered packer than is required under this section.

`(e) RELATIONSHIP TO OTHER PROVISIONS- Nothing in this section affects the interpretation of any other provision of this Act, including section 202.'.

END