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Sheep Industry Finally Hears
Details On Trade Assistance

By Colleen Schreiber

DENVER — Since July, the U.S. sheep industry has been awaiting further details on a three-year, $100 million trade assistance package promised to them by President Clinton through the 201 trade case.

More than six months later, no money has yet changed hands and many contentious details have yet to be resolved, but the basic structure of the program was finally announced at the recent American Sheep Industry Association annual meeting here.

The whole process was set in motion in September 1998 when an industry coalition led by ASI, lamb feeders, lamb packing and processing companies and other associations, filed a "201" trade petition. The coalition led the charge to try to curb the flood of "cheap" imported lamb they felt was wrecking the domestic lamb market.

The U.S. International Trade Commission ruled in early 1999 that a surge of low-priced imported lamb meat onto the domestic market had in fact injured U.S. producers. The vote was unanimous — six to zero — in favor of the domestic industry's trade petition, but it took President Clinton until July to decide what action he would take regarding the ITC ruling. Finally, on July 7, the president ordered a sliding scale of tariffs to be imposed for three years on lamb meat imports from Australia and New Zealand, the source of about 98 percent of all lamb meat imports to the U.S.

In the first year a nine percent tariff was applied to the first 31,851 metric tons or 70.2 million pounds. If the amount exceeded the quota, the imposed tariff was then set to rise to 40 percent.

The tariff began on July 22. ASI reports that lamb imports dropped 38 percent from August through December. A total of 18,638,618 pounds were imported during that five-month period compared to 30,080,377 during the same months the previous year.

Australia filled about 25 percent of its one year quota during that time period, while New Zealand filled about 18 percent of its first year quota.

In year two, the tariff is set for six percent on the first 32,708 metric tons or 72.1 million pounds. After that, the imposed tariff rises to 32 percent, and in the third year a three percent tariff will be imposed on the first 33,565 metric tons or 74 million pounds and a 24 percent tariff on tonnage above that level.

Dr. Enrique Figueroa, Deputy Under Secretary of Marketing and Regulatory Programs for USDA, outlined the details of the $100 million assistance plan during one of the general sessions at the ASI meeting. The plan makes $50 million available during the first year and an additional $50 million during the second and third years for production improvements, market promotion, animal health and domestic purchases.

Figueroa gave further specifics on the amount dedicated to each of the four categories. In the area of productivity improvements, funds have been allocated for direct payments and guaranteed loans. A total of $30 million — $10 million each year over three years — has been dedicated to direct cash payments to producers for production practices and quality incentives that will improve the competitiveness of the industry, the USDA spokesperson told listeners. Practices that would qualify as production improvements, he added, would be things like genetic selection, lambing facilities, feedlot development or improvement, etc.

"The objective is to find tools that will help the producer become more competitive. Each individual will have to decide what will make him more competitive," he told listeners.

As written, the plan says that only "small" and "medium" sized producers are eligible for direct payments. The eligibility requirement drew considerable discussion following Figueroa's presentation. Producers wanted to know the definition of a small, medium and large producer, and many questioned why large producers who were just as willing to make necessary improvements to become more competitive were deemed ineligible.

Though he couldn’t say for sure, Figueroa said that in all likelihood, USDA would model this program after the one used last year in the hog industry. In that program, producers selling more than 2500 head over a six month period were deemed ineligible for direct payments.

"It was our estimate that truncating it there that about 95 percent of all hog producers qualified for the direct payment. We envision something along those lines for sheep producers," he told listeners.

That drew another round of discussion in which ASI members argued the point that the lamb industry and the hog industry were in no way similar, particularly when it came to defining the size of producers and overall structure of the two industries.

The gist of the discussion was that it takes all producers, from the very small to the very large, to keep the sheep industry viable; none, they said, should be discriminated against.

"We need the big guys, or the few processing plants we have won't be able to survive," one producer commented.

Another said, "We need the small guys to keep the flow going. It's a lack of production during certain times of the year that gets us into these price problems," he stressed. "I’m disappointed that we're even talking numbers."

Figueroa assured members that their concerns would be taken into consideration before a final plan is implemented.

Guaranteed loans, Figueroa said, will also be available to processors for upgrading, replacing and installing new processing and packaging equipment for domestic lamb packing and processing plants. A total of $15 million will be made available the first year and $5 million the following two years. Another $5 million in guaranteed loans in year one and year two has been tagged for producers to help them cover flock and farm improvements and operating expenses.

Funds for productivity improvements not expended in the first year, he said, will be made available in subsequent years. Guaranteed loan funds for processors will be appropriated through USDA through the Farm Service Agency, Farm Loan Programs and Rural Development, Rural Business Cooperative Service.

Funds for this portion of the program are supposed to be made available by March for processors and funds for operating loans for producers are available immediately.

The animal health portion of the plan appropriated $10 million to be used in the first year for the scrapie eradication program. APHIS and USDA budgets appropriated almost another $3 million for this effort. An additional $5 million has been requested for year two, and for year three if needed.

Two proposed scrapie rules were published on November 30. The first rule proposed to restrict interstate movement of sheep and goats from states that do not adequately control scrapie. It also proposes to require animal identification for sheep and goats moving interstate and to reinstate a scrapie indemnity program to compensate owners of certain animals destroyed due to scrapie.

The other proposal was to waive certain requirements to allow APHIS to conduct pilot projects to test new or emerging technologies and measure effectiveness.

Phase one of the program will be conducted under guidelines established by APHIS' Veterinary Services to validate a live animal test, establish a national regulatory effort, and to work with numerous flock producers who will request participation in the Voluntary Scrapie Flock Certification Program.

Funding for this portion of the plan will come through the Commodity Credit Corporation and will be made available upon completion of rulemaking for the scrapie eradication plan. A public comment period ended this past week.

Another $5 million has been assigned for market promotion. Four million is to be used for product promotion activities and the remaining $1 million for marketing improvements. Money for this portion of the plan is being secured through the National Sheep Improvement Center, and the entire amount will be made available in the first year. The sheep center has already requested that the these funds be reimbursed and added back to the center's revolving fund. Additionally, the sheep center has an agreement with USDA that the board of the NSIIC be involved in how the money is spent.

Proposals for market promotion, Figueroa told listeners, will be expected to increase demand and position the industry to be more competitive with imports within the next three years. Request for proposals are scheduled to be issued in January.

In regard to marketing improvements, USDA's Agricultural Marketing Service is set to develop various programs to ultimately produce a more desirable, consistent product that in turn will provide higher returns for all segments of the lamb industry. Possible programs include a cooperative lamb marketing program, flow of carcass information to lamb producers and feeders, USDA process certification, pelt certification and price reporting.

"It will take cooperation from all players in order for these programs to work," Figueroa stressed.

The fourth portion of the lamb industry adjustment assistance program involves domestic lamb meat purchases by the government. A total of $15 million, $5 million over the next three years, has been allocated, Figueroa said. In fiscal year 1999, October 1998 through May 1999, AMS supported the lamb industry with purchases of 1.1 million pounds of lamb at a cost of $4.1 million.

Colorado lamb feeder Harold Harper, speaking during the open discussion, encouraged the USDA official to act quickly in regard to domestic lamb purchases.

"Our inventory has been decimated over the last three weeks by a $17 to $19 drop in the dressed market," Harper told Figueroa. "I would encourage you to implement the domestic purchases as soon as possible."

     



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