After numerous hearings over the past year, the Senate and House held hours-long hearings the last week of April on proposed cattle market legislation and the current state of fair markets and price transparency.
Each chamber’s respective hearing included witness testimonies from cattle producers, most of whom also represented an industry association or organization. At the April 26 hearing in the Senate to review the Cattle Price Discovery and Transparency Act of 2022 and the Meat and Poultry Special Investigator Act of 2022, two representatives from USDA were also present.
The following day in the House of Representatives, the hearing on “An Examination of Price Discrepancies, Transparency and Alleged Unfair Practices in Cattle Markets” included testimonies from each of the Big Four packers.
Senate hearing
The first part of the over-three-hours-long Senate hearing focused on the Meat and Poultry Special Investigator Act of 2022, which would establish a new USDA office dedicated to enforcing the Packers and Stockyards (P&S) Act.
Andy Green, USDA senior adviser for fair and competitive markets, and Bruce Summers, USDA Agricultural Marketing Service administrator, each testified strongly in favor of the legislation, saying it would immensely support staff and help with P&S Act enforcement.
The second panel of the hearing included three cattle producers and an economist, and the meat of the matter was really on the proposed Cattle Price Discovery and Transparency Act of 2022, which would establish minimum levels of fed cattle cash trade by dividing the country into different regions. The bill would also create a library of alternative marketing agreements (AMAs).
Producer witnesses included: William Ruffin of Ruffin Farms, representing the U.S. Cattlemen’s Association; Shawn Tiffany of Tiffany Cattle Co., president-elect of the Kansas Livestock Association, representing the National Cattlemen’s Beef Association (NCBA); Shelly Ziesch of Ziesch Ranch, representing the North Dakota Farmers Union and National Farmers Union; and Stephen R. Koontz, Ph.D., Colorado State University professor of agricultural and resource economics.
Sen. Deb Fischer (R-NE), sponsor of the spot market bill legislation, opened her questioning period by noting there were supposed to be Nebraska cattle producers testifying at the hearing, but “None of our producer members we encouraged to testify were willing to put themselves out front for fear of possible retribution by other market participants—an unfortunate reality of today’s cattle industry.”
Producers were split on whether they or their respective organizations supported government mandates.
Tiffany said most cattle producers oppose government mandates for cash trade and noted the American Farm Bureau Federation changed its policies to oppose government-mandated minimums.
He said the Cattle Price Discovery and Transparency Act would end his business model as it exists today and will instead “apply 20-year-old pricing mechanisms to an industry that has advanced beyond just cash trade.”
Koontz, whose work has focused on how mandates will negatively impact producers, said the bill could cost producers between $23 million to $249 million annually, depending on its implementation.
Ziesch said the Farmers Union organizations she represented supported the cattle market bill, along with Sen. Chuck Grassley’s (R-IA) 50/14 legislation. She noted she didn’t think AMAs needed to be disallowed, but they needed to have limits.
Ruffin also supported mandated cash minimums, saying he has to guess whether he is getting a fair price or not because the transparency just isn’t there. “Without the cash value, they have put the independent feedyards out of business,” he said.
Sen. Cory Booker (D-NJ) was also present at the hearing, proclaiming in his opening remarks, “In all of America, there is no vegan more passionate about fighting for farmers and ranchers than me.”
House hearing
A day after the Senate hearing, the House Agriculture Committee held a 5 1/2 hour hearing to discuss concentration in the meatpacking industry, with accusations that packers participated in unfair practices to drive down prices for cattle producers to increase their profit margins.
Rep. David Scott (D-GA-13), chairman of the committee, said during his opening remarks competitive markets should benefit everybody in the supply chain, not just those at the top. Scott noted the federal government has failed to enforce anticompetitive laws, and a consolidated industry creates a less resilient supply chain.
Producers who testified were somewhat in agreement that changes need to occur for ranchers to make a profit in the industry.
Coy Young, a cow-calf producer from Missouri, and Gilles Stockton, a cow-calf producer from Montana and president of the Montana Cattlemen’s Association who was representing the Northern Plains Resource Council and Western Organization of Research Councils, advocated for the reinstatement of mandatory country-of-origin labeling, greater enforcement of the P&S Act and more cash trade.
Young said packers control the market with AMAs, and small feedlots are closing due to the agreements. Young continued that it is hard to make money in the current system because “there is not enough room in the rigged system for a small cattle farmer to make a buck.”
He said currently, he makes 37 percent of the retail dollar, when 30 years ago, ranchers made 60 percent of the dollar. Stockton concurred with this statement and said in 1979, he could buy a new truck with the sale of 18 calves, and today it is 59 calves.
The panel of three producers said there should be more small, regional processors to increase processing capacity.
Don Schiefelbein, NCBA president, thanked Congress for providing safety net programs such as drought assistance but said there should not be too much overregulation of the industry. Schiefelbein pushed the representatives to coax the Department of Justice (DOJ) to finish its investigation of the meatpacking sector. “Where are we today? We have not heard boo or squat,” Schiefelbein said. “We don’t know what the situation is or what the response ought to be.”
Reps. Vicky Hartzler (R-MO-04) and Dusty Johnson (R-SD-At Large) agreed in frustration that it had been two years since the investigation and they had not heard from the DOJ.
A common theme among the packers was that market concentration has remained constant in the last couple of decades, and profit margins have shifted from the cow-calf producer to the packer in 10-year cycles. Market forces have driven cattle prices, and Donnie King, CEO and president of Tyson Foods, noted they do not set the prices for cattle they buy or the beef prices that consumers pay.
“These prices are set by straightforward market forces, namely available supply and demand,” King said in his opening remarks.
Packers contend black swan events such as COVID-19 have disrupted the market and slowed cattle processing due to a lack of available labor, resulting in lower cattle prices. At the same time, King said, “The price for finished beef … was rising, driven by skyrocketing consumer demand,” and “Basic economics holds that when demand is high and supply is low, prices will rise, which is precisely what they did.”
Packers noted that while in the past couple of years they have experienced higher profitability, money has been invested into increasing capacity to keep up with consumer demand.
The packers also attributed the amount that consumers pay for beef to geopolitical issues and inflation. Tim Schellpeper, CEO at JBS USA, noted that packers do not set the retail prices.
In his opening remarks, Tim Klein, CEO of National Beef, said USDA data shows fed cattle supplies have peaked and will decline over the next several years. Consequently, the cattle cycle will change in favor of the cattle production sector and return to a “more normal seasonal trend and (will cause) National Beef’s profit margins to compress.”
Klein said profits shift back and forth between the cattle production segments that work together to create a quality product. Schellpeper concurred that it is a cyclical process, and JBS buys cattle how cattle feeders want to sell them, whether it is on a cash basis or through AMAs.
All packers stated they purchase cattle from cattle feeders of all sizes with a good percentage of cash purchases, as well as from sale barns, video auctions and AMAs. Klein asserted that more cash trade would not help producers.
Scott chastised the packers, stating that profit levels were high well before the supply shocks and the packers were controlling the supply to keep prices down for producers. Scott explicitly asked the packers whether there was an agreement to corroborate on pricing and supply, to which the packers said no, and Schellpeper said, “Not that I am aware of.”
Rep. Glenn “GT” Thompson (R-PA-15), ranking member of the committee, said he was very concerned about the Biden administration’s regulations regarding processing line speeds and “decades-old Packers and Stockyards regulations that have been misleadingly touted as the solution to everything from volatile prices to industry consolidation.”
Rep. Rick Crawford (R-AR-01) said the Biden administration is falsely blaming packers for rising inflation.
Several representatives questioned the purpose of the hearing, with Rep. Kat Cammack (R-FL-03) calling it “political theater” and stating Congress should focus on other issues affecting producers and consumers. — Anna Miller, WLJ managing editor, and Charles Wallace, WLJ editor
