What about the PRIME Act? – Emergency Measures to Protect the US Meat Supply During and After the COVID-19 Pandemic

Alan Lewis

Alan Lewis

I. Background

Longstanding policies that favor concentrated control by global conglomerates have undermined American livestock producers and curtailed local economic opportunity. The effects of this “meat monopoly” have been exposed by coronavirus.

A.  Many American livestock producers depend on restaurant and institutional markets, which have closed due to COVID-19. Consumption has moved to in-home preparation. Mainstream meat processing plants can’t keep up with re-directed demand from retail stores resulting from restrictions on food-service businesses.

B.  Livestock producers could shift deliveries to fill the gap caused by increased consumer need to buy direct from farmers and from meat at grocery stores, but federal rules often prevent areas of high supply from selling to consumers or shipping across state lines into areas of high demand.

C.  Meat processing capacity at large plants has been significantly reduced due to spread of COVID-19, curtailed immigration, and ICE enforcement. About 27 large plants supply the majority of conventional meat products. Closures and reductions in available workers causes a noticeable effect on supply.

D.  There are thousands of small and medium size processing plants still operating, but they process animals at a slower (and safer) speed and are already overwhelmed by the increase in requests for processing caused by the closure of the big plants. They cannot take on new customers and services are sometimes reserved twelve months out. This bottleneck will tighten after spring feeding when mature fattened animals are ready for market.

E.  Lack of access to livestock processing creates economic and social distress among livestock producers.

1.   Producers are feeding mature animals without a market to sell them to.

2.   Monopoly livestock markets are offering to buy at prices below production costs.

3.  Live animals are being sold for pennies on the dollar an any taker.

4.   Some herds and flocks are being killed en masse.

F. American shoppers will experience reduced availability of meat and increases in the retail price of meat as supply tightens.

G.  Killed-off herds will take years to rebuild and rebalance.

H.  Foreign meat producers using substandard practices are allowed to sell imported meat as Product of USA.

1.   Consumers are mislead and confused by untruthful and fraudulent labeling

2.   Global meat conglomerates use their own fictitiously low import pricing to quash value of US livestock. American producers must compete with a phantom foreign market.

3.  Many retailers and pacakged brands knowingly buy foreign meat and label it Product of USA despite its source.

II.  Governing Laws and Regulations

A.  Federal Oversight

1.  USDA Inspected Plants – FSIS Inspection Requirements

a)  Inspector present before, during, and after slaughter to ensure animals are healthy and slaughter is humane and safe.

b)  Unfit animals quarantined or refused

c)  USDA trained inspector on-site during processing

d)  Facility is inspected constantly for sanitation practices while operating

e)  Pathogen testing at intervals

f)  Unfit meat from animals is diverted and destroyed

g)  Meat graded primarily on fat marbling and age

h)  USDA “Mark of Inspection” allows interstate sales & exports

i)  Inspection services paid for by USDA

2.  State-Inspected Plants (state regimen must match federal requirements)

a)  The Federal Meat Inspection Act of 1967 (FMIA) and the Poultry Products Inspection Act of 1968 (PPIA) limits state-inspected meat to intrastate sales. 1,900 small or very small establishments in 27 states operate under this FSIS-approved regimen. The remaining states have only federally inspected plants and exempt facilities.

b)  The Talmadge-Aiken Act of 1967 established Federal-State cooperation using state employees to provide federal inspections to allow for interstate sales. 360 establishments in nine states operate under these provisions. All states may agree to recognize these federally-sanctioned state inspection programs to allow transport and sale between their states, under the Cooperative Interstate Shipment of State Inspected Meats program.

c)  2008 Farm Bill allows states to opt to create their own inspection systems the “same as” the federal government’s and then may ship across state lines, but eligible plants are limited to those with an average 25 or fewer employees.

d)  Under some state programs, all or part of inspection costs are paid by USDA.

3.  Foreign Slaughter and Processing

a)  Meat from livestock slaughtered and processed overseas under another nation’s laws may be imported into the US. After minimal cutting or packaging in the United States, it can be labeled “Product of USA”.

b)  USDA Food Safety and Inspection Service “Policy Book” allows “Product of USA” label on imported meat.

4.  Establishments Exempt from Meat Processing Inspection

a)  Restaurants and commissaries doing further processing carcasses or meat cuts for their own customers.

b)  Custom processors providing slaughter of animals and cutting of meat owned by their customers and delivered to their customers marked “Not for Sale”. Referred to as “Custom-Exempt”.

c)  Slaughter and processing by an individual for personal use and non-paying guests

d)  Poultry processing up to 20,000 birds a year for in-state sale if regulated by the state.

e) Note: all exempt facilities must still comply with FSIS safety and sanitation rules and may be subject to state/local inspection and licensing as food handling facilities.

III.  Proposed Emergency Measures

A.  Allow meat processed by Custom Exempt Processors to be resold to consumers within each state subject to safety oversight.

1.  Establish minimum qualifications and training for full-time on-site inspectors at Custom-Exempt processors to allow for sale within the state.

2.  Enforce appropriate staging, slaughter, processing, and storage rules for small scale processors to maintain a high level of animal welfare and food and worker safety.

3.  Require expanded labeling for resale meat, including “Processed and Inspected under emergency COVID-19 rules”.

4.  Require the purchaser’s name and contact information to be logged by the seller to ensure traceability and contact in case of a recall.

5.  Re-employ healthy experienced workers and inspectors from closed plants.

6.  Invest in local infrastructure, training, and employment opportunities.

7.  This measure essentially implements the PRIME Act under temporary emergency rules but requires on-site inspection while operating.

B.  Expand capacity at state-inspected meat processing establishments by allowing new inspectors to cover additional plant shifts.

1.  Establish minimum qualifications and training for additional inspectors to expand capacity through additional lines or extended hours.

a)  Veterinarians and Vet Techs with training on large animal health

b)  Persons with specialized experience, training, and meat processing in meat processing

2.  Allow existing state inspectors to oversee and review temporary inspectors.

3.  Appoint a statewide coordinator to approve emergency inspectors with guidance from USDA.

4.  Reopen closed and shuttered small processing establishments using start-up grants and loans.

 

C.  Allow meat processed by state-inspected establishments to be sold across state lines.

1.  State inspections already match federal practices.

2.  Fund additional hiring and training of qualified on-site inspectors to expand capacity.

3.  Draft expanded labeling requirements including “Inspected by [state name] Dept of Agriculture in compliance with USDA FSIS Rules.”

4.  This would allow 1900 processing plants in 27 states to sell into interstate commerce.

D. End fraudulent and misleading loopholes for in-store retail signage and label claims regarding the origin of meat:

a)  Reserve “Product of USA” exclusively for meat from animals born, raised, and processed in the United States of America. An example of a change to state law:

“A retailer who sells beef or offers beef for sale shall use a conspicuous placard that is readily viewable by the public and placed where the beef is located to designate and display the beef as: (A) “U.S.A. Beef” if the beef is exclusively from animals born, raised, and slaughtered in the United States or born and raised in Alaska or Hawaii and transported for a period of not more than sixty days through Canada to the United States and slaughtered in the United States; or “Imported” if the beef is from any animal born, raised, or slaughtered in any foreign country. The placard for Imported Beef must indicate each country.”

b)  Current federal FSIS policy allows imported meat to pass through US plants and be labeled “Product of USA”. This loophole creates unfair competition with domestic producers, significant meat safety issues, and is a fraudulent representation confusing to American consumers. Here is the proposed change to the FSIS Policy Book:

Product of the USA Labeling – The Committee is aware of a citizens’ petition to amend the Food Safety and Inspection Service’s Standards and Labeling Policy Book as it pertains to meat and meat products bearing the label of “Product of U.S.A.” The Committee acknowledges that FSIS’s current definition that allows for meat and meat products to bear the label “Product of U.S.A.” if “the product is processed in the U.S.” is incongruent with the vast majority of consumers’ perception of the “Product of U.S.A.” label. The Committee urges the Agency to clarify the current regulations to ensure that “Only meat and meat products from animals born, raised and harvested in the United States are allowed to bear the label “Product of U.S.A.”

E.  Direct government purchasing programs to access domestic, local and smaller-scale meat processing sources first.

F.  Ban government purchases of meat raised or processed in other countries.

 IV.  Current Legislation

The PRIME Act would repeal the federal ban on the sale of meat from custom exempt slaughterhouses. The bill returns control to the states to address the issue of meat processing. States would be able to permit producers to sell meat processed at a custom slaughterhouse within the state. States could choose to impose whatever conditions or limitations that best suited their particular agricultural, food system, and social conditions. These facilities meet state regulations as well as basic federal requirements. They are typically very small with few employees. The extensive and complicated federal regulations that apply to massive meatpacking facilities are neither needed nor appropriate for these operations, which might process as much meat in an entire year as the large facilities do in a single day. Their small scale also means that they are better able to provide necessary social distancing and sanitation measures while safely continuing operations.

A.  The PRIME Act could help improve access and reduce meat prices for consumers in the coming months while providing income for small farmers and ranchers across the country. And it has many long-term benefits:

1.   Help establish vital infrastructure in rural communities.

2.   Improve farmer incomes and opportunities.

3.   Increase consumer access to locally raised meats.

4.   Reduce stress on animals from long-distance hauling.

5.   Reduce transportation miles and greenhouse gases.

B. Small Plant Safety Under the PRIME Act.

Some believe the PRIME Act may not provide adequate food safety oversight to ensure only wholesome meat products reach consumers. Suggested amendments to fix this oversight while still keeping to the intent of the bill are:

1.   Establish minimum qualifications and training for full-time on-site inspectors.

2.   Enforce appropriate rules staging, slaughter, processing, and storage for small scale and low volume processors to maintain a high level of animal welfare and food and worker safety.

3.   Require expanded labeling for resale meat, including “Processed and Inspected under emergency COVID-19 rules”.

4.   Require purchasers to provide name and phone number or email to Custom Exempt seller to ensure traceability and contact in case of a recall. Wholesale purchasers will maintain their normal FDA approved recall response protocols to notify their customers.

5.  Encourage custom-exempt plants to re-employ healthy and experienced workers and inspectors from closed plants

V.  Resources and Sample Letters

1.  Sample letter to Governors and Departments of Agriculture (on request)

2.  Sample letter to Members of Congress (on request)

3.  Sample letter to USDA Secretary of Agriculture (on request)

4.  Sample letter to White House (large type, on request)

5.  Phone numbers and emails (on request)

a) Federal legislators, regulators, state Ag and Governor info

6.  References to each law and reg mentioned above:

a) 21 U.S. Code CHAPTER 12— MEAT INSPECTION

b) Federal-State Cooperation on Meat Inspection

c)  Federal-State Cooperative Agreements: GAO Report

d)  State Depts of Ag Regulations Overview

e) Primer on US Food Safety Regulation – Report to Congress

f) Talmage-Aiken Act (State Inspection for Interstate Sale)

7.  FSIS Food Standards and Labeling Policy Book

8.  ATTRA / NCAT Resources:

· Finding a Local Poultry Processor

· NCAT Directory of Small Poultry-Processing Plants and Services

· Special Help for Small and Very Small Processing Plants

· Mobile Processing Units

· Red-Meat Inspection Basics

· Niche Meat Processing Assistance Network (NMPAN)

·  ATTRA Publications about Meat Production

· Resources about Small-Scale Meat Processing

9.  Primer on Livestock and Grassland Ecology (by the author – on LinkedIn)

10.  National Association of State Agriculture Departments Resources:

·       Interstate Meat Shipment Issue Paper

·        Map: Number of State-Inspected Meat and Poultry Plants

·        Interstate Meat Shipment Creates a More Uniform Inspection System

·        Interstate Meat Shipment: Fairness in Trade

·        Interstate Meat Shipment: History of Support from USDA and Congress

·        Interstate Meat Shipment: Expands Small Business and Rural Development

·        Interstate Meat Shipment: More Competitive Markets

·        Coalition Urges Action on Interstate Meat Sales Legislation

·        Interstate Sales Legislation is about Economic Fairness

·        The Real Facts About State Meat And Poultry Inspection

·        ND Department of Agriculture

·        Urgent Need to Improve the Relationship & Communication between FSIS and the State Inspection Programs

·        State Review Process of Meat Inspection Programs

·        Implementation of the New Title V Interstate Meat Shipment Program

·        Letter to Secretary Vilsack Conserning Interstate Meat Inspection Programs3/06/09

·        Implementation of the New Title V Interstate Meat Shipment Program: Recommendations

·        Interstate Meat Sales Bill Introduced

·        House Interstate Sales Bill Introduced

·        State Agriculture Officials Urge Action On Interstate Meat Sales Legislation -Group Launches National Grassroots Campaign to Support Passage

·        Coalition Urges Action on Interstate Meat Sales Legislation

·        Interstate Sales Legislation is about Economic Fairness

·        Compromise Reached on State Meat Inspection

·        Letter from Fred L. Dailey in support of S 1988

·        Coalition Letter to the Senate Agriculture Committee in support of S.1988

·        2000-09-19 S. 1988, the New Markets for State-Inspected Meat Act

·        Letter Requesting Status on Report to Congress Reviewing State Meat and Poultry Inspection Programs

·        2005-10-13 Letter Requesting Meeting to Discuss Interstate Meat Shipment

·        Urgent Action Request-Senate Action on Interstate Meat Shipment

·        Interstate Shipment of State-Inspected Meat and Poultry Products Letter of Transmittal, November 2, 1999

·        Action Alert-The Senate Ag Committee is meeting today to decide whether or not to take action on interstate meat shipment legislation on S.1988

Hatch-Daschle substitute amendment to S. 1988, legislation to lift the unfair ban on interstate shipment of state inspected meat.

Header Photo: Business Insider

May 9, 2020 

From Greg Gunthorp and Mike Callicrate:

We are not opposed to the Prime Act per se.

We do not believe however that it should be our big ask regarding inspection because of the COVID pandemic.

Economics and access to labor are the biggest challenges facing our country’s small packing plants.  They have 6-10 times more labor in a pound of product than the 300 to 400 head per hour cattle plants, 1000 head per hour hog plants, and 170 birds per minute chicken plants.  And the marketplace does not allow them to fairly compete against the predatory and deceptive marketing practices of the big guys.

Most niche meat in the stores and distribution is from the same big guys that have destroyed this industry.  So, I reiterate it’s not going to solve our economic struggles nor our labor issues of running little plants.  And then add in that its not going to be accepted as legal in lots of jurisdictions.  Look at the poultry exemptions. Those only work for in-state sales to non-institutional buyers in most areas.  In some states, the federal exemption isn’t even allowed, or only allowed for on-farm pickups.  That isn’t going to bring about the fundamental and transformational changes we want in rural America and our food supply.

The Prime Act can’t change the meat in the grocery store because non-inspected meat can’t be sold in the grocery store (liability). We need reform of inspection systems. We need sane and reasonable state meat and poultry inspection systems in each state. These need federal legends on the products. No distinction in difference in the labels except the establishment numbers. No restrictions to go across state lines. The only restriction should be less than 50 full-time employees and a separate system for export verification.

We need federal funding for constraint points in existing and new slaughter facilities as well as micro on-farm processing only facilities.

We need truth in labeling. Food fraud is rampant. The various agencies need to figure out who is responsible for assuring the label isn’t deceptive or misleading. COOL must be mandatory. “Product of the USA” should be for the U.S. born raised and processed only.

The PRIME Act doesn’t require inspection. In an economy in which the biggest cheater wins, small processors have NO chance of success, unless they cheat, and cheat they will. States must have inspection (better than current USDA) and products must be able to cross state lines in order for small plants to access population centers.

If we consider the PRIME Act the solution, we will miss an important opportunity to get real change.

From Food and Water Watch:

We are opposed to the PRIME Act. While we agree that USDA rules can be a burden on small plants and that big companies are good at manipulating that system to their advantage, we don’t support measures like the PRIME Act that we believe would essentially wipe out federal inspection by letting state-inspected meat cross state lines. This would totally undermine federal inspection because big companies would switch to state inspection because state agencies are easier to push around.

Instead, we support measures such as Sen Booker and Rep Pocan’s Food and Agribusiness Merger Moratorium and Antitrust Review Act that would break up consolidation so there are more options for slaughter, including within the federal inspection program.

Local Veterinarian Inspection:

We could employ rural veterinarians and vet techs as meat inspectors under the Talmadge-Aiken Act. This would save USDA a lot of money and provide inspection by professionals that live in the communities where full-time, and especially less than full-time inspection is needed. There is dire need to rebuild our local/regional food systems, especially around meat processing. Consumers would have access to better quality, locally produced meat. Animals would avoid the stress of long-distance travel to big slaughterhouses. The economic benefits of more of the food dollar remaining in farming and ranching communities would be substantial.

Many veterinary clinics have too much work for one vet, but not enough for two. Inspection duties could mean better job opportunities for veterinarians and many more jobs for packing plant and related industry workers.

The vet schools (CSU) might like the idea of adding a potentially valuable meat inspection credit as part of the vet school curriculum.

USDA hasn’t liked the idea due to the deeply embedded mission to put small plants out of business in favor of their bosses, the big meat packers.

I would estimate that USDA, under the current onerous and ineffective rules of HACCP and confrontational inspectors, increases the small plants costs by 30% or more.

I currently have inspectors that travel over 300 miles one-way to provide inspection in St. Francis. My inspector from a couple of weeks ago traveled in from a COVID-19 infected area. This is a huge biosecurity risk to our workers and the community.

Posted in General Advocacy | Leave a comment

Testimony of Herman Schumacher, Herried, South Dakota, appearing before the Senate Agriculture Committee, June 10, 1998

Good afternoon, Mr. Chairman, Honorable members of the Senate committee, and Mr. Secretary. Thank you for the opportunity to present testimony here today.

My name is Herman Schumacher from Herried, South Dakota. I am a cattle producer, cattle feeder, and livestock auction operator and auctioneer. I have been involved in livestock production basically all my life. As I present this statement today, I can tell you I have never been more troubled. You see, Senators and Mr. Secretary, I know something most of you may not know.

The northern plains is a quiet place because there are very few of us who live there. We seem to be best known lately for our disasters, like tornadoes, droughts, winter blizzards, and floods. Our history has always included the natural disaster type adversities and high levels of risk, but there is one thing we continue to do with little recognition.  We produce food. Food, not only for sustaining life, but the raw, natural food production that is the very basis of wealth creation, that provides the fuel for this nation’s economy. We are producers. We invest the capital, provide the labor, and take the risk. We have never asked for or received high rates of return.

I was honored to serve on the 1996 USDA’s concentration committee and became part of a minority report identifying the most serious problems that others on the committee elected to minimize and ignore. I observed members of the committee who were also producers, selected by producer organizations like the National Cattleman’s Beef Association (NCBA), National Pork Producers and others who are mistakenly perceived by you and other leaders to represent the best interests of producers, actually sell out their members to the interests of big agribusiness.

I have realized the real threat to production agriculture is not the natural disasters of the Dakotas, but the predatory multi-national agribusiness corporations.  These companies were well represented on the committee and through their presence, influence, and intimidation controlled the outcome. Even the studies that were commissioned have now been proven to be flawed, and yet are still referenced by some, trying to justify and minimize the economic rape these companies inflict.

These now monopolistic global predators have surrounded us, forcing the prices of what we produce below our cost of production while in many cases becoming the only source of high priced inputs.  These same companies have not only invested heavily in gaining essential monopoly control over cattle feeders and producers but have also gained incredible influence in national and state politics.

Laws designed to uphold our constitutional rights of freedom and equal treatment are not being enforced. One such law, the Packers and Stockyard Act of 1921( P&S Act), the only law legislated to protect producers and consumers from another meat monopoly like the one of the early 1900s, has not been enforced. Government has succumbed to the lies of “efficiencies of scale, economies of size, the global economy, etc.” to justify this catastrophic destruction of the American beef industry.

Please explain to me, and other cattle producers the following economic inconsistencies–

  • Why are domestic cattle producers going broke producing less than 85% of the U.S. domestic demand? Overall, retail, hotel, restaurant, and export prices are at record highs. (USDA chart herewith)
  • Why have cattle producers (USDA chart herewith) lost basically 20% of the consumer beef dollar at the same time the packer, processor, distributor, and retailer have gained approximately 20%, posting record profits. In 1975, it took seven calves to buy a new pickup. Today it takes nearly 100 calves. Like us, how many of you could live on 1975 wages with 1998 expenses?

Consider the fact that the four-firm packer concentration during the same time increased from 36% to 87% and non-competitive packer controlled, captive supplies of IBP, the dominant price leading packer, increased from basically zero to levels as high as 122% (IBP Vs Robert M. Cook); meaning they needed basically no cattle from the cash market.

Recently, two of the three biggest packers, IBP and ConAgra have traded finished cattle between themselves, reported the low price, and broke the live cattle trade almost $60.00/head from industry asking prices. This is corporate greed and solid proof that these companies intend to cooperate, rather than compete.

  • Why, with the shortage of high quality, domestic beef, are the multi-national corporations allowed to export this domestic demand building premium beef overseas at exorbitant prices not shared with producers? (Ruth Fertel; Ruth Chris Steakhouses is questioning expansion plans due to short supplies of prime beef. Fall, 1997)
  • Why are low quality, uninspected, and unsafe beef imports allowed to cross our borders unlabeled and unrestricted? Imports as with U.S. producers are bought below cost of production in other countries by the multi-nationals and sold in the U.S., free of our government-imposed costs.

These imports in many cases are produced under non-sustainable production practices, using slave-like labor, chemicals, and growth promotants illegal in the U.S.  I have provided you with the Canadian data showing how their 224% increase in export values have resulted in lower to unchanged prices to producers. Where is the U.S. data?

  • Why are uninspected and unsafe foreign meat imports allowed free access to all U.S. markets when U.S. producers are denied that same market access across our own state lines through state-inspected processing plants? These State plants have a far better safety record than the nation’s biggest packer and global merchant of e-coli, IBP.

Fecal contamination and the resulting e-coli problem at IBP should be no surprise considering they are known for having the fastest chain speed, highest injury rates, and highest worker turnover in the meatpacking industry (U.S. News and World Report).

  • Why are U.S. cattle producers denied access to vital price information? How would the NYSE function without transparency? Remember the late 1920s?
  • Why do beef producers have to “give access to get access” in the global market while poultry processors enjoy high import restrictions while exporting freely?

The beef checkoff has recently come under scrutiny and is being questioned as to its benefits to the producers funding the commodity checkoff.  As a board member of the Livestock Marketing Association, I am part of the effort asking for a referendum on the beef checkoff.  Almost a billion dollars and 12 years later we have lost nearly half of our cattle producers, lost significant market share to poultry, lost the image of our quality product to the consumer, exported the top 8% of the beef supply at no benefit to the producer, promoted low-quality beef imports and funded the attack of the multi-national packer against the global cattle producer.

The cattleman’s promotion money has been hijacked by the NCBA.  As recently as 1996, South Dakota auction markets conducted a survey on the beef checkoff.  8,200 cattle producers voted to discontinue the checkoff, with 202 voting to keep it.

Many others and I believe the NCBA has sold out the interests of U.S. producers for the sake of the so-called “global economy”. NCBA, USDA, and others are condemning the Europeans for their trade policies protecting their healthy and diverse agriculture. Should we expect Europe to sell out their producers just because we have?

The very packers that are manipulating the low prices paid to producers and handing higher margins to retailers are force-feeding complaining consumers the most inconsistent beef product in history.  These same packers, namely IBP, are given producer checkoff dollars for value-added product development. Without fair distribution of the consumer beef dollar, any value-added will be the packers’ gain only.  Packers can adopt a number of very inexpensive practices to improve beef consistency and quality immediately, but they do nothing, and with NCBA’s help, defer the unwarranted blame for lost market share to producers.

Finally, NCBA, empowered with checkoff funds, has provided cover for these multinational predators by promoting the benefits of bigness and continually minimizing their constant P&S Act violations.  Most recently NCBA has tried to blame low prices on the Asian financial crisis, despite the fact that beef shipments in the Jan-Mar, 1998 period totaled 500.4 million pounds, 10% above 1997, and a new record for the quarter (USDA chart herewith).

Packer controlled, NCBA, represents less than 40,000 members of the nearly one million U.S. cattle producers, many of which are generated through feeder cartel and feeder council member feedlots and many of whom do not participate, plus many who may not even be aware they are a member.

You may have seen in the recent news coverage of our small town, Spencer, South Dakota, recently wiped out by a tornado, residents wondering why it should be rebuilt. The town was already gasping its last breaths. This small agricultural community is made up of many farmers and ranchers exploited to the point they are left believing there is no hope. The biggest cause of death in agriculture is suicide. Producers feel shut out of the system and feel helpless and hopeless.

Remember, I said I know something you may not know?  Without a healthy, diversified agriculture we will fail as a nation.  Be forewarned that the U.S. Beef Industry is in catastrophic crisis. We are in the same position we were in 77 years ago when in 1921, Wyoming Senator John B. Kendrick stated the following on the Senate floor:

“It (the beef industry) has been brought to such a high degree of concentration that it is dominated by few men.  The big packers, so-called, stand between hundreds of thousands of (cattle) producers on one hand and millions of consumers on the other.

“They have their fingers on the pulse of both the producing and consuming markets and are in such a position of strategic advantage they have unrestrained power to manipulate both markets to their own advantage and to the disadvantage of over 99 percent of the people of the country.

“Such power is too great, Mr. President to repose in the hands of any men.”

His efforts resulted in the establishment of the 1921 Packers and Stockyards Act.

Today, at a minimum, this committee can—and must—take immediate steps to enforce this same P&S Act ending anti-competitive meatpacker concentration and monopoly, and breathing life into this nation’s dying beef industry. Most of the other problems discussed here today are simply symptoms and the results of this deadly monopoly cancer.

Contrary to multi-national corporate rhetoric, steps must be taken to safeguard producers and consumers from unsafe meat and remedy the inability to identify the source of potential problems by adopting country of origin labeling on all beef and beef products.  Producers are entitled to information on price, and today, without mandatory price reporting by these few companies, their market busting deals will stay secret.

Why are these deals secret? Why has there only been one man who is willing to speak out? Is it that feeders are in a favored position or are feeders just completely intimidated by the packers? Why are IBP-aligned cattle feeders, like Cactus and Simplot, expanding their feeding operations at the same time other more efficient and lower cost feeders are unable to sell their cattle at fair prices and are filing bankruptcy?

I have spoken to hundreds of feeders who are helpless and completely demoralized. Yet, when I have asked them to speak out, most have refused. So far, there has only been one cattleman who is willing to come forward and speak–Mike Callicrate of St. Francis, Kansas. As was once said:

“Truth is not only violated by falsehood, It may be equally outraged by silence.” 

To conclude my statement, how many of you really understand and feel the problems we have in agriculture today? I think our South Dakota senators–Tom Daschle and Tim Johnson–understand it because 55 percent of our state’s total economy is dependant on the cattle industry. They realize that their state’s economy left alone is going to fail. I also think that Agriculture Secretary Dan Glickman got the drift a couple of months ago when he participated in a public agriculture forum in Aberdeen, South Dakota, where nearly 2,000 disgruntled farmers and ranchers showed up.

On behalf of all the people in agriculture today, I am asking you as committee members to tear away the rhetoric. Take the bull by the horns and stop these unfair business practices. Stop letting agri-business influence the votes through their giant campaign contributions. Your action to end market concentration can save the farmer and rancher.

If you want to see first-hand what is happening, I invite you to come to South Dakota where many farm auctions are going on, on a daily basis and the auctioneers are saying “SOLD” as the gavel ends a way of life and many people’s dreams.

Thank you,

Herman Schumacher

Posted in General Advocacy | 2 Comments

WE HAVE THE MOST RICH AND THE MOST POOR

There is Overproduction and yet Some People Starve — Our Country is The Richest in Natural Resources in The World and Yet Destitution and Suffering Prevail –The Condition Should be Carefully Examined and Remedies Proposed

The principles on which the government of our country is founded are set forth in the Declaration of Independence and the Constitution.

The country in which we live is favored in natural resources above all others on the planet, but in spite of all the blessings of Providence, in spite of the acknowledged industry of an intelligent people, destitution and suffering prevail. Our cribs and granaries often are filled overflowing and yet we read of starvation. Often and often we read of overproduction, and yet, every day, we see men, women, and children suffering from cold and hunger. Again, we read that farmers are getting rich, but government statistics tell us that in 1850 the farmers owned half of the wealth in the United States, in 1890 one-fourth, and in 1913 less than one-fifth. We have more millionaires than any other nation in history, and more paupers, and the number of both are increasing. There must be something wrong with our political economy.

It is the duty of everyone to examine carefully the conditions which surround us – then propose remedies. I am glad to know that people are investigating and want to know the truth.

I am glad that we have arrived at that point where people are judging men by the work they accomplish, as the tree is judged by its fruit. By that measure, every honest man is willing to be measured, and by that measure, every honest man should measure others.

“I hope no man’s fealty to his party will prevent him from hearing and knowing the truth.”

I hope no man’s fealty to his party will prevent him from hearing and knowing the truth. I believe that the masses of the people are honest and want to know the truth and do right.

It is said we have five senses: namely, seeing, hearing, smelling, tasting and feeling. That used to do but that won’t answer the purpose now, you will have to go deeper down into yourself to diagnose conditions and learn the truth. Any fool can see, hear, smell, taste and feel. A mule is equipped that well.

If you have voted the Democratic ticket, you have no doubt done what you thought best. If you have voted the republican ticket you have done the same. A Socialist has done no more. We are all citizens of a common country. Our interests are the same. We all love our families, our, homes, our country, and its flag. If we are good citizens, we place each of those things above party and God above all.

But now my friends before I go any further, I want to tell you a little anecdote, and I hope you will make the right application of it. Away back in the eighties when it transpired. An old friend of mine, Peter Radford, told Bill Skinner he believed there were a hundred rats under his barn. Bill suggested that he had better come down a rat or two, but Peter wouldn’t do it, and finally, they made a bet, Bill betting five dollars that there were not a hundred rats there. Peter got a long pole and said he would get under the barn and stir up the rats and then Bill could count them. Bill said that was all right. Peter crawled under the barn and began to punch around and presently the whole ground was covered with rats. Directly peter called out: “How many rats do you see Bill?” “Not a rat,” said Bill. Then Peter did some more vigorous punching and again asked Bill how many he saw. “I didn’t see a rat,” replied Bill. Then Peter raised a bigger racket than ever, and the rats fairly swarmed and tumbled over each other. They were running out from under the barn across the lot, under the cribs and two or three actually ran over Bill, who was lying down, apparently looking under the barn. “Do you see any now?” asked Peter. “Not a rat,” said Bill. Peter threw down his pole in disgust, brushed his clothes, and said: “Bill why couldn’t you see the rats? They were running all over you.” “I had my eyes shut I didn’t want to see them,” said Bill.  Now, my friends, I want to tell you that Peter Radford is still my friend and that he is still after the rats. Over two million Bill Skinners have opened their eyes, watching the political barn and if rats are under it, they know that it is to the interest of all to see them and punch them out. Let us read our papers and all other reading matter with our eyes open, and then we will see the rats.

“There are a few men in this country who will contend that everything is lovely and that we are getting on swimmingly. They are mostly speculators.”

There are a few men in this country who will contend that everything is lovely and that we are getting on swimmingly. They are mostly speculators. They are reaping a rich harvest. Our natural resources are unparalleled. Yet, with all the blessings of a kind providence on one hand, we find want, destitution and suffering on the other, and so I am asking you to speak information as to the cause of this condition.

The notorious corruption of our law-making bodies is due almost wholly to their power to grant special privileges and to sell public franchises to private individuals or corporations. Legislative reform that ignores the cause of corruption is never excusable.

Public ownership of natural monopolies will abolish the bribe-taker by making impossible bribe-giver.

Every physical or moral ill is the result of some breach of natural or divine law. “Education” must be our watchword. It is only by education that we may hope to gain perfect liberty and equality. This republic can endure only while built upon the love of the whole people for each other and for the nation. The Constitution of The United States, says Congress shall have power, to establish post offices and post roads, to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.

When the money is scarce it takes more labor and more property to obtain it. To every cotton raiser, it means more cotton, to every wheat raiser it means more wheat, and to every stock raiser, it means more cattle and more hogs. Whoever controls the volume of money in any country is absolute master of all industry and commerce.

When the Farmers’ Union asked for a government loan on cotton, it raised a dickens of a bugaboo, we were told it was not only impractical but unconstitutional, that care should be taken that nothing was done that would embarrass the raising generation. It has become quite popular now to pronounce everything unconstitutional that has for its object relief for the masses. The government may loan to five individuals who will incorporate themselves into a company under the name of a national bank, but it’s a violation of the Constitution to loan to a farmer who owns the basis of all securities. The Government has loans millions of dollars to expositions and railroad companies with practically no security and no one has been swift to denounce it as unconstitutional or embarrassing to the rising generation. Government has loaned money to banks, with and without interest. The government has loaned money to those who went abroad and could not get back from Europe unless they had the gold, and the government loaned it to them. The government has loaned money to the States, and the States have loaned money to individuals, on real-estate security. The state of Missouri and Oregon loan their school money to farmers on real-estate security. Certainly, we farmers can better pay 2 or 3 percent interest than 8 or 10 percent. No man has ever been able to point out where or why it is unconstitutional for the government to loan money to the farmer.

“No man has ever been able to point out where or why it is unconstitutional for the government to loan money to the farmer … it helps every man when you help the farmer.”

But I am asked how this would help the renter, who has no real estate. Loan it on his cotton, on his grain. But says the fellow who is not a farmer, how is this going to help us? We answer by saying it helps every man when you help the farmer. It increases the price of every laborer, thereby making it easier for them to pay their debts. The United States Supreme Court says:

“There are times when the exigencies of the State rightly absorb all subordinate considerations of the private interest, convenience, or feeling; and at such times the temporary though compulsory acceptance by a private individual of the government credit, in lieu of the debtor’s obligation to pay, is one of the slightest forms in which the necessary burdens of society can be sustained.

“The heart of the nation must not be crushed out. The people must be aided to pay their debts and meet their obligations.”

“When the ordinary currency disappears, as it often does in time of war when business begins to stagnate and general bankruptcy is imminent, then the government must have power at the same time to renovate its own resources and to revive the drooping energies of the nation by supplying it with a circulating medium. What the medium shall be what its character and qualities, will depend upon the greatness of the exigency and the degree of promptitude which it demands. These are the Legislative Questions. The heart of the nation must not be crushed out. The people must be aided to pay their debts and meet their obligations. The debtor interest of the country represents its bone and sinew and must be encouraged to pursue its avocations. If relief, were not afforded, universal bankruptcy would ensue, the industry would be stopped, and the government would be paralyzed in the paralysis of the people.”

“When I stand in the United States Treasury, I stand on English soil.” – Nathaniel P. Banks

It is chiefly the laws of property which have enabled the few to accumulate vast wealth while the masses live in poverty. For many generations, our laws have been framed with a view to the claims of property rather than the rights of man. For ages, the money power has controlled legislation the world over, and I am sorry to say, has exercised a controlling influence in our own land for many years. In the language of the Declaration of Independence: “All men are created equal and endowed by their Creator with certain inalienable rights; that among these are life, liberty and the pursuit of happiness.“ If man has an alienable right to life, then he has a right to the means which sustain life, and of which he can not be justly deprived by laws which permit one man, or set of men, to so absorb the means of life as not to leave sufficient to sustain the lives of all. If man has an inalienable right to liberty, then he cannot be justly deprived of liberty by another who assumes the right at his mere discretion to abridge it. If man has an inalienable right to the pursuit of happiness, then he cannot be justly deprived of that right by laws interposed in the way of its pursuit. Do such laws exist, and if so, how came they into existence?

“And our flag newly woven. Every stripe and every star. With the cannonballs for shuttles. In the roaring loom of war; And our gallant weavers dyed it with their manhood in each hue. Red for courage, white for honor. And for the faithfulness the blue.”

With best wishes for the Farmers’ Educational and Cooperative Union, I am truly yours

-O.F. DORNBLASER

Courtesy of National Farmers Union Historian, Tom Giessel

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Unintended Consequences of Allowing Captive Cattle Supply

April 28, 2020

By Gilles Stockton

The collapse of cattle prices following the outbreak of coronavirus has most certainly got our attention and has sparked an intense desire to do something about it. One idea that has gotten traction is to require that beef packers purchase more of their cattle in the spot market, which at best has been only 20% of the cattle and sometimes nearly none.  Both the US Cattlemen’s Association (USCA) and R-Calf have come up with competing versions of this idea.  USCA wants 30% of total fat cattle sales to be made in a spot market while R-Calf ups the ante to 50%.  My feeling is that we had best beware the law of unintended consequences.

More cattle purchased in the spot market would probably semi-solve a problem in pricing cattle sold under formula and basis arrangements (captive supply).  But it is the unintentional flip side that is the problem.  Requiring a certain level of spot market purchases sanctions the captive supply practices which make up the rest of the market – 70% captive supply in the case of the USCA’s plan and 50% in that of R-Calf.  This would not be good.

In looking to solve one problem, USCA’s and R-Calf’s proposals unintentionally concede that the packer monopoly and market dysfunction is inevitable. Passage will add to the economic forces pushing cattlemen to join the ranks of chicken and pork producers as vertically integrated cogs in a giant meat machine. An actual public competitive market for cattle will be a thing of the past as is already the case for chickens and pigs. I am sure that the proponents of enhanced spot market purchases do not desire this outcome.

Requiring packers to buy more fat cattle on the spot market will not increase competition or price discovery.  The spot market is nothing more than a negotiated sale for near term delivery. Because of the Mandatory Price Reporting law, spot market sales must be reported, which at least is a positive thing. The spot market price, in turn, is used to settle the delivery price for the captive supply cattle.

It will still be the same four packers buying and each will still have their own territories, which effectively eliminates any chance for competition between them. And there would still be no opportunity for a small competitor to bid against the big boys. In short, requiring that packers buy more cattle for immediate delivery would shine a little light on cattle pricing practices, but not nearly enough.

The worst effect of this approach is that it would undermine the most important protection we have that is written into the Packers and Stockyards Act – the prohibition of undue preference or unreasonable prejudice:

It shall be unlawful with respect to livestock . . . for any packer . . . to:

  • Engage in or use any unfair, unjustly discriminatory, or deceptive practice or device; or
  • Make or give any undue or unreasonable preference or advantage to any particular person or locality in any respect whatsoever, or subject any particular person or locality to any undue or unreasonable prejudice or disadvantage in any respect whatsoever; or . . .

The way that the market for fat cattle has evolved is plainly in violation of the P&S Act because it is based on secret arrangements that are predicated on undue preference and unreasonable prejudice.  The reason that this happened is that beginning about 1980, the Justice Department made a policy decision to stop enforcing the antitrust laws.

Neo-Liberal economic theory coming out to the Chicago School of Economics became the government’s de-facto anti-trust policy. Under this economic theory, it is assumed that larger firms have natural economies of scale which in turn results in lower prices for consumers. The effect on the market for those of us who supply the dominant firms with raw materials is, under Neo-Liberal economic theory, irrelevant.

But the anti-trust laws are still on the books, and the Packing Cartel would no doubt be delighted if the Packers and Stockyards Act was weakened. All that I am writing here would be merely academic if there were no proposal out there that would actually fix the cattle market dysfunction – once and for all. Not only has one been proposed, but it has also been vetted from both a legal and economic perspective. In addition, in 1999, USDA actually held a hearing on this proposal with nationally recognized legal and economic experts debating the pros and cons.

Of all of the ideas that have been tossed around, only Captive Supply Reform actually solves our problem.  It simply states that in order to be compliant with the P&S Act, 100% of the fat cattle must be purchased through a public market. This can be an exchange where the price and terms are publicly offered, or preferably a virtual auction, similar to the video market through which a large number of forward contracts for feeder calves are sold.

The actual wording is very simple. Captive Supply Reform only requires that a base price be set at the time the contract is agreed to. Instead of mandating that a set percentage of cattle be purchased on the spot market, feeders and packers would be free to enter into forward contracts for any length of time that is convenient for their purposes. Just as in feeder calf forward contracts, a base price would be set along with a list of conditions that will adjust the final settlement.

If packers desire to also be in the cattle feeding business, their cattle would have to be offered for sale in a public forum.  If fat cattle are shipped in from Canada, these too would have to be priced through a public forum. The beauty of all this is that no regulatory agency would be needed to monitor the program because all of the prices and terms of sale would be publicly open. The other beauty of Captive Supply Reform is that, although it does not break up the packer cartel, it would allow, for the first time in half a century, true competition by start-up specialty packer firms.

I have been told that Captive Supply Reform is too ambitious and that it would be better to tinker by fixing the cattle market in incremental steps. Besides, I have been informed, there is currently interest in Congress to require more cattle to be sold on the spot market and we should take advantage of this interest. But have the allies in Congress actually held hearings and debated the pros and cons – and the alternatives?  I don’t think that this has happened.

This coronavirus pandemic has revealed how vulnerable our globalized economy actually is.  Outsourcing of manufacturing, just in time delivery, dependency upon autocratic governments, control of important industries by criminal elements, the wholesale monopolization of key industries – Free Trade is revealed as a cynical lie. In agriculture, beef markets are undermined by imports while wheat, corn, and soybean exports are vulnerable to every global hiccup.

It is clearly time to rethink the structure of our economy including a complete overhaul of farm and rural policy.  Captive Supply Reform was proposed by a number of western state’s senators back in 2007, but it was our organizations that failed to coalesce to push for its passage. Division, among like the minded cattle producer organizations, has failed us time and again. However, we now see how vulnerable our future as independent cattle producers has become, the time has come to unite and restore competition to the cattle market.

Gilles Stockton

Grass Range, Mt 59032

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Corporate Colony or Strong Community?

Kerry Hoffschneider

Kerry Hoffschneider

Manager at Word & Deed Communications
Independent Journalism by Kerry Lea: Mike Callicrate shares his thoughts and experiences advocating for independence, fairness and transparency in the beef industry. He is not alone in his sentiments and is encouraging others to stand up, work together and lead. Unity is needed in agriculture, but it needs to be informed unity that understands how we got here.

By Kerry Lea Hoffschneider

A few weeks ago, when the COVID-19 panic hit, retail sales at Ranch Foods Direct, owned and operated by Mike Callicrate, were up 3.7 times compared to a year earlier. The sales are leveling out now, however, this independent model of direct to the consumer food items like meat, produce and eggs are increasing in demand.

“I am a rancher who is in the meat business,” said Callicrate, a member of the Organization for Competitive markets, who has been a long-time champion for beef and cattle producers after being blackballed by large meatpackers after he, along with a group of other ranchers, sued the packers for their monopoly of the market.

“I got blackballed by the big packers and built my own pathway to the market. My ranch is in St. Francis, Kan. and we slaughter onsite and ship the carcasses to Colorado Springs where they are processed and distributed. I have a pretty good idea of the process from the cow being bred to being steak on a plate,” he explained.

“Our workers, I am so proud of them,” Callicrate said about the effort the team at Ranch Foods Direct has made to meet the dramatic up-tick in demand after COVID-19 hit, “After the virus began, there was not a package of meat anywhere in Colorado Springs to be found in a big box. In this new age of globalization, the supply chains didn’t work in the times they were most needed, and we just proved it.  We don’t even have enough face masks or medical equipment we need, let alone the meat on the shelves.”

“The big packers have been cooperating since they became members of the National Cattlemen’s Beef Association (NCBA). In fact, the late Hughes Bagley – a former executive vice president of IBP, told me they’ve been cooperating since the 1970s,” Callicrate said.

Callicrate said he met Bagley, a former executive of IBP who was suing IBP for cheating him on his retirement the same time he was part of the cattlemen’s group suing IBP that led him to be blackballed, “Hughes developed what they called a ‘cattle pack’ for IBP. IBP was not getting enough of the entire animal sold. Coming from the retail sector, Hughes suggested that IBP put a program together that would incentivize retailers to purchase the whole animal. IBP literally credited Hughes for saving the company.”

“Hughes explained the ‘tram system’ to me. The small packer could not sell carcasses anymore to retailers because IBP had developed the box, which included the ‘cattle pack.’ The small packer, unable to box their beef, was forced to sell their carcasses to IBP. The problem with that is IBP competed against the small packer in the trade with fat cattle and the only buyer was IBP for the carcass,” he said.

“The ‘Tram’ was a combination of special semi-trailers designed to hold full half carcasses, along with specially designed docks that would only accommodate the tram trailer, thereby locking the small plant into the IBP tram system. And, it’s clear now because the small packers are nearly all gone. IBP dominated and took over.” Callicrate explained.

“What happened in 1996, is they blatantly jumped in bed together as new members of the NCBA. National Beef, Cargill – and the other packers gathered at the NCBA convention. We have all been flat-out played for fools and the big feedlots have also been part of the problem. The big feedlots, having lost a real competitive market, decided to align with the packers, beating the hell out of the cash market,” he went on.

“In the 1980s I ran a custom feedlot and when people would send me their cattle to feed, I increasingly got the feeling I was a ‘transfer agent,’ in this rigged game. The meatpacker stole the wealth of the cattle owner and shared it with the big retailer. The feedlot is really just a ‘middleman’ that wants a ‘full hotel,’” he explained. “I had this shameful feeling of being that ‘transfer agent,’ and acting as the ‘tool’ of the meatpacker.”

Callicrate said cattle producers need to know many of the big feedlots are getting “seriously big” preferences for contributing a captive supply of cattle, “It’s known that some feedlots are secretly getting kickbacks annually on the live weight they sell to the packer. At 10 cents per pound live weight, that can be around a $135 advantage. Consider you are a Midwest farmer feeder and everything your farm is producing is going through your cattle. What if you go to the sale barn to buy feeder cattle and the guy has $135 advantage over you? This is how we have lost more than 80,000 feedlots. That big feeder also gets to sell his cattle in a timely fashion, when they are ready and not a month or more later. The United States Department of Agriculture (USDA), armed with the Packers & Stockyards Act, has done nothing about this unfair and illegal preference.”

“Trump has done nothing but make it worse,” Callicrate continued. “He’s even allowed imports of beef from Brazilian and African countries that are infected with foot and mouth disease. Can you imagine COVID-19 on one hand and dealing with foot and mouth disease outbreaks on the other?”

“The South American and other global producers are under the boot of the same big packers too. We are all losing. We are burning down the Amazon to plant more corn and soybeans so that JBS and Cargill can have cheap feed and so China can have feed for their Smithfield hogs. We have allowed the corporate takeover of our industry and our country,” he said.

Being blackballed by the meatpackers has forced Callicrate to learn some difficult lessons about all areas of the industry and how global markets work against the average U.S. producer, “We had 23 Chipotles at one time at Ranch Foods Direct. We were in talks to expand to over 50 locations including the Denver area. It was going to be a great deal for our company. Without notice, instead of expanding the business, Chipotle informed us that we were losing all the business. We were replaced with Australian beef at 30 percent below our cost of production. I had $250,000 of beef inventory on hand and a processing machine valued at $185,000 that hasn’t run since.”

“The Colorado Department of Agriculture is considering a new local/regional ‘Colorado’ brand to better support the region’s farmers and ranchers. In an interview last week, I warned that new infrastructure must be in place to sell directly to the consumer, otherwise the existing monopoly-controlled system will continue to extract the valuable wealth produced on the region’s farms and ranches.  Those corporations will not allow you to make any money, you are a cost to be reduced, essentially slaves to them,” he said.

That is why Ranch Foods Direct continues to focus on maintaining the trust of their customers that buy directly from them. Callicrate said for now he will continue to invest the profits from Callicrate Banders to keep their efforts going and to fight the big packers and their alignment with large, corporate retailers and distributors, “On any day, the big packers can manipulate the cattle futures, and thereby cattle prices, to their advantage. The cattle futures have been merely a mental conditioning tool, making willing sellers out of desperate cattle owners, and no longer serve any good purpose.”

“The cattle business has been a fool’s game for at least the last 30 years, and we have been the fools. During that time, cattle producers have lost 30 percent of their share of the consumer beef dollar, amounting to $1,000 per head loss at the farm and ranch gate. Unlike football, there are no referees in this game,” he said adamantly.

“The U.S. is a colony of big, corporate power. When is the last time a new mile of fence was built? So, without addressing the real problem of market concentration, we go out and throw money at the farmers. Without a market, anything you give the farmer or rancher will, in turn, be extracted by the big companies either through higher input costs or lower output prices. That is one of the reasons why prices for corn, wheat and soybeans are the same today as they were in the 1970s – that is not inflation adjusted, that is actual dollars,” he pointed out.

“One of the deadliest diseases that humanity has ever faced is aggressive price shopping consumerism, where you search for the cheapest of everything. You know what you end up with? You end up with more and more rural decline, broken-down, abandoned main streets with a Dollar Store at the edge of town. Farmers and ranchers, America’s real wealth creators, are now living in a second-hand Dollar Store economy,” Callicrate said and adamantly.

In closing, he urged his peers in agriculture to take action and lead in a community-driven fashion, “Make sure your neighbor is okay and you are treating your neighbor like they matter, not like in the 1980s when people were hoping the neighbor would go broke so they could get their land. It’s time to go home and make your community as good as you can make it.”

Follow Mike at:  https://nobull.mikecallicrate.com/

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Kerry Hoffschneider

Kerry Hoffschneider

Manager at Word & Deed Communications
Published • 3h

 

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