In order to be utilized, trimmings must be "leaned up" with low-fat domestic or imported beef which have a fat content of only ten to fifteen percent. For 100 pounds of belly cuts, it takes about 132 pounds of 85% lean beef to produce hamburger which does not exceed the legal maximum 30% fat content. To reduce the fat content to 20%, the legal limit for "ground beef", it takes 610 pounds of such lean beef.

Because U.S. production of high-quality beef steers and heifers has steadily increased, these fat trimmings have, of course, increased as well (Column II, Table I, Appendix). But, as Column III of the Appendix shows, since 1965 this increase has not even been sufficient to offset declines in domestic cow and bull beef production.

For years the MIC has maintained that, far from injuring domestic beef producers by direct competition, imports actually benefit U.S. producers of table beef by supplying lean material which is necessary for their fat trimmings or "belly cuts" to be upgraded into salable products. (This point was made at pages 23 and 25 of our brief before this Committee of June 24, 1968.)

The U.S. beef industry has committed itself to continuing specialization by raising high-quality, grain-fed animals. In this area, it has enjoyed tremendous success virtually doubling production in fifteen years. But there is no quantity of fatty by-products, no matter how large, that can ever satisfy America's needs for manufacturing beef. As the cattlemen continue specializing, the gap between lean beef supply (domestic cow and bull plus imports) and fed beef becomes greater and greater. Without sufficient lean beef for combination, unusable excesses of fat trimmings will necessarily cause prices received by cattlemen to decline or, at least, fall short of potential return.

This is occurring at the present time, and a significant "cheapening" of fat. belly cuts and trimmings may be currently observed. To demonstrate this, we set out below prices taken from The National Provisioner Daily Market Service for March 16 and June 5, 1970 for fat materials (full plates, navels, briskets, rough flanks and 50% lean trimmings) and 90% lean boneless beef:

During April, 1970, 50% lean trimmings from choice navels rose to around 351⁄2¢ per pound, up to only 11⁄2¢ from a year earlier, while 90% boneless beef averaged $64.50 per hundreweight-up nearly $7.00 from the April 1969 average of $57.60.

The shortage of lean beef with which to mix the fatter materials was clearly a major factor in the relative weakness of prices for fat belly cuts and trimmings. It is believed in the industry, and is logical to assume (though no actual statstics are available) that excessive quantities of domestic fat belly cuts and trimmings are largely responsible for very high cold storage warehouse stocks in recent months.

Disproportionate supplies of fatty trimmings may help the consumer by reducing the prices for soap and candles. But they won't help by reducing overall cost of materials for the meat processor.

Divergent opinons have been expressed as to the appropriate percentage of beef steer and heifer carcasses which constitute usable fat trimmings. U.S. producers and feeders have gone on record that as much as 26% of the average carcass is used in processing and manufacturing. This figure tends to distort actual percentages of fat trimmings available for meat production by the inclusion of bones, unusable kidney fat and waste. Any price and supply statistics for manufacturing meats based on such a fallacy are in error.

A more accurate figure for usable fat trimmings is 12-14% of carcass weight, or about 9% of live weight.

THE U.S. MARKET FOR LEAN MANUFACTURING BEEF SHOULD BE RETURNED TO A NORMAL STATE BY REPEAL OF PUBLIC LAW 88-482

Since 1964, Public Law 88-482 has menaced U.S. manufacturers of meat food products, food market chains, importers and brokers with the constant threat that increasing imports of sorely needed products to meet demand would trigger a quota which in turn would result in a substantial cutback in available supplies. During this same period of time the domestic cattle cycle has, as it has for generations, continued to reach peaks and valleys of production and profitability, without regard to meat imports.

Concurrently, domestic and import prices paid for manufacturing beef have risen sharply. Importers and users of lean manufatcuring beef continue to compete hotly for limited available supplies of raw materials while Mrs. Housewifethe American consumer-finds herself paying skyrocketing prices in support of an artificial market condition created by an Act of Congress which has benefited

no one.

CONCLUSION

During the course of these hearings by the Committee on Ways and Means many proponents of restrictive legislation have based their arguments on socalled "unfair" competition from low-wage countries. Repeatedly, these witnesses have suggested that quotas or orderly marketing arrangements for certain imported products would allow the United States industries competing therewith to recover and compete on a normal basis. In the case of manufacturing grade meat, normality is currently a dead letter because of the adoption of just such a misguided panacea.

We believe that the President's Trade Bill provides ample protection for U.S. industries while at the same time furthers the best interests of the United States continuing historic trade policy. Accordingly, we support H.R. 14870.

The Meat Importers' Council of America, Inc. respectfully submits that all proposals designed further to restrict imported meat are now obsolete due to the consumers' unsatisfied needs for modestly priced and freely available meat food products manufactured from domestic and imported lean meats. It is estimated than even if current quota controls were removed completely for the year 1970 only about 200 million pounds additional manufacturing meat could be found in the world marketplace. If it were possible to obtain these supplies, which are badly needed, we predict that there would be an immediate and direct impact on wholesale prices for imported meat and a similar effect on the retail prices paid by consumers for manufactured products such as hamburgers and sausages. We predict further that the decrease in wholesale prices for imported meat, should the voluntary scheme and quota system set forth under Public Law 88-482 be suspended, would be around 5¢ per pound and that the decrease in comparable U.S. canner and cutter grades would be somewhat less, possibly 1-2¢ per pound. There would be virtually no price depressing effect on wholesale prices paid for U.S. good, choice and better carcasses.

For the foregoing reasons we urge that supplies be allowed to equal demand and that members of this Committee undertake to modify or repeal existing law and oppose any further quota measures for meat and meat products.

In 1964, the year Public Law 88-482 was enacted, average retail prices for ground beef and frankfurters (as reported by 40 regional and national chain stores) were 74¢ and 62.4¢ per pound respectively. In the third quarter of 1969 the price for ground beef was steady at a high of 66¢ per pound, a 40 percent increase, while the average September price for frankfurters rose 31 percent to 82.1¢ per pound. Earlier this year, (not the period of peak demand) prices were maintained at less than 10 per pound below the records cited above and are virtually certain to set new record highs before this summer is over. A major cause of this price trend is the shortage of lean beef from which hamburgers, frankfurters and similar food products are manufactured.

It is, of course, a fact that the strict quota set forth in Public Law 88-482 has never technically been "triggered." At first this was because allowable imports were well below the trigger point. Since 1968, however, technical triggering of the quota has been avoided only by voluntary self-imposed limitations of exports by principal supplying countries. The law has operated to keep out badly needed meat since 1968 and has brought about shortages which in turn have driven up wholesale prices. The "surcharges" brought about by special interest

quota legislation and laws such as Public Law 88-842 are borne by those who can least afford to pay-the low and middle income consumers.

Imports of lean fresh, frozen beef first became substantial during the period 1957-59 when domestic production declined sharply (see Appendix Table I). Until 1968, imports freely rose and fell in inverse proportion to domestic production, permitting a generally orderly and steadily increase in total supply. Since 1968, however, demand has exceeded maximum permissible imports under the quota law. Thus, under the present law and current insufficient U.S. supplies, imports may no longer act as the necessary supplement to U.S. production. Short supplies and sharply increased prices are the result.

U.S. production of lean manufacturing beef will decline significantly during the next few years. American usage of such meat (whether domestic or imported) has increased, in absolute terms, an average of about 22 percent per year for several decades. In order to satisfy a constant increase of 22 percent per year in supplies, increased imports of between 200 to 300 million pounds per year will be required. Yet, under the present quota law, annual increases in allowable imports have not, and will not, average as much as 30 million pounds per year.

If the threat of a strict quota under current statutory provisions has created an unnatural and inflated market for manufacturing meat in the U.S.A., Congress must, we submit, recognize the lesson of history and reject any attempts to limit further available supplies by means of so-called "orderly marketing" or quota schemes for imported meat and meat food products. Vigorous lobbying by the cattlemen and other vested interests seek to mask the sleeping rebellion of the consuming public.

In the face of a ten percent decrease in cow slaughter during January-March 1970, as compared to the same period a year ago, prices on utility cows advanced sharply to $23.75, about $2.60 above a year earlier. This likely reflects the significant drop in the slaughter of dairy cows, which make up the bulk of cow slaughter in the winter and spring. The USDA predicts that the slaughter of dairy cows will continue downward in 1970, with slaughter of beef cows expected to be near 1969 levels. This reduced supply of cows for slaughter should result in prices well above a year earlier for the balance of 1970. As cow slaughter is a primary source of manufacturing meat, a reduction in its level will result in further shortages, as other sources cannot compensate for the reduction.

Source: U.S. Department of Agriculture Livestock and Meat Situation, March and May, 1970. April 1970 slaughter estimated from USDA figures.

The total inventory of cattle and calves on farms was at an alltime high of 112 million head at the beginning of this year, with a beef herd of 91 million head and a dairy herd of 21 million head. The beef herd has been expanding every year since 1958, and last year increased by nearly 3 million head. The dairy herd, following a pattern of steady decline in numbers since 1945, decreased 421,000 head in the past year.

The increase in beef cows since 1955 has been offset by the decrease in milk cows and other milk stock, so that this major domestic source of manufacturing meat has remained relatively constant since 1955.

Source: U.S. Department of Agriculture Livestock and Meat Situation, March, 1970,

p. 5.