Good information, particularly regarding prices, is the lifeblood of most industries that buy and sell goods. That’s especially true in the livestock and meat industry in which millions of dollars change hands every day of the week. That “good” information however must be accurate and unbiased, as comprehensive as possible, timely and easily accessible and understood by all market participants.
Fortunately for the U.S. industry, it has a price reporting system for both livestock and meat that is the envy of the world. At any given moment of the day, one can find everything from latest feeder cattle prices at auctions around the country to what kidneys or other steer byproducts sold for the day before. In all, USDA’s Agricultural Marketing Service (AMS) issues more than 300 market reports each week that detail livestock and meat price trends, contracting agreements and supply and demand conditions, while protecting the confidentiality of proprietary transactions.
Given the plethora of price information today, it is easy to forget it didn’t used to be like this. Packers until the late 1990s were not required to report the prices they paid for animals or the terms of sale. Rather, daily sales and price information was collected by AMS from companies on a voluntary basis. AMS reporters also attended auctions to collect price information. However, as more and more animals were sold under formula pricing, other contract or captive supply arrangements, the open cash markets became less helpful as benchmarks.
There were also growing concerns in the mid-1990s in the industry and Congress over packer concentration as meat packing companies were consolidating and getting larger, says AMS in a backgrounder on mandatory price reporting (MPR). This was captured in a 1996 report on a survey of pork packers. In the fall of 1998, the hog industry faced an oversupply situation and negotiated slaughter hog prices fell to historically low levels. At the same time, some hog producers were engaged in alternative formula contracts that did not decline in value as much, says AMS.
The resulting outcry from this scenario and the ongoing concentration concerns prompted Congress to pass the Livestock Mandatory Reporting Act of 1999, says AMS. It established a program of information about the marketing of cattle, swine, lambs, and the products of such livestock to provide information readily understood by producers; improve the price and supply reporting services of USDA and encourage competition in the marketplace for livestock and livestock products.
AMS implemented the Livestock Mandatory Reporting (LMR) program in April 2001. Through this program, packers and importers began to submit the purchase and sales of livestock and livestock products to AMS. Livestock Mandatory Reporting was developed to facilitate open, transparent price discovery and provide all market participants, both large and small, with comparable levels of market information for slaughter cattle, swine, sheep, boxed beef, lamb meat, and wholesale pork, says AMS. MPR, through the LMR program, has been reauthorized regularly since then. The current LMR authority is set to expire Sept. 30, 2020.
AMS has also, in consultation with industry groups, expanded its cattle and other reports. The latest began June 19 when AMS expanded the purchase categories on LMR negotiated cattle reports to include dressed FOB and live delivered information. All negotiated cattle reports will reflect the same format as the National Weekly Direct Slaughter Cattle-Negotiated Purchases report, it says. This enhancement will provide more uniformity to LMR reports and supply customers with additional market information. All LMR negotiated cattle reports will now include individual data lines for steer, heifer and mixed steer/heifer classes of cattle. The three classes will distinguish between FOB or delivered shipment, and live or dressed basis, says AMS.
As mentioned, AMS issues literally hundreds of market reports each week. Some reports are issued daily, such as its regional direct cattle slaughter report. AMS reports on any fed cattle sales in Colorado, Iowa/Minnesota, Kansas, Nebraska, and Texas each afternoon and then summarizes the prior day’s sales the next morning. These reports provide a comprehensive breakdown of transactions, from negotiated cash and negotiated grid price ranges and average prices to head count and average dressed weights.
Now consider USDA’s monthly Cattle on Feed reports published by its National Agricultural Statistics Service (NASS). No other country with a cattle feeding sector of any size publishes monthly reports, let alone in the detail of the NASS reports. Its reports provide on-feed inventory, placement and marketing data for the 12 largest cattle feeding states and a U.S. total. It also provides a placement breakdown in six weight categories, from under 600 pounds to 1,000 pounds and over.
These breakdowns are valuable in allowing analysts to forecast likely marketings in the months ahead. This and other data that USDA provides each week or month give cattle producers added confidence to make informed decisions about everything from selling their calves to retaining ownership through the feeding phase. Such data is the lifeblood of the industry. — Steve Kay
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
