As I mentioned in my Comments last week, price discovery at a fed cattle level is on ongoing discussion with multiple “fixes” being proposed within the industry. Two weeks ago, the National Cattlemen’s Beef Association (NCBA) rolled out their idea outlined in the report, A Voluntary Framework to Achieve Price Discovery in the Fed Cattle Market, sent to members by NCBA President Marty Smith.
Last week, a different letter was making news. This letter was signed by 17 state cattlemen’s associations and was sent to both the Senate and House Agriculture Committees supporting a regulatory fix—something that NCBA clearly stated in their letter that they wanted to avoid unless hitting those “trigger points.”
Seventeen state cattle organizations have written the leadership of the House and Senate Agriculture Committees backing legislation that would give the U.S. agriculture secretary authority to set regional minimum negotiated cash trade sales for cattle across the country.
Just five days after NCBA’s letter was sent out, the group of state cattlemen’s associations sent off a letter to Congress supporting their legislative ideas for a fix. Instead of sitting idly on the sidelines to wait and see if the voluntary approach would be successful in encouraging more price transparency between packers and feedlots, these state cattlemen’s associations asked Congress to take regulatory action as soon as possible.
The letter strongly voiced support for two bills: the proposed Cattle Market Transparency Act of 2020 (S.4647) sponsored by Sen. Deb Fischer (R) from Nebraska and the near identical bill in the House (H.R. 8557) sponsored by Missouri Rep. Vicky Hartzler (R-4).
The letter spells out four key points that they feel will benefit the cattle industry if this proposed framework is passed into law. First, the bill requires the Secretary of Agriculture to establish regionally sufficient levels of negotiated trade. These regional cash minimums would be established using public comment and monitoring would be implemented within 12 months.
Packers would face penalties of up to $10,000 per violation if not following these cash minimums. Secondly, to shed some light on some of the secrecy behind the contracts and formulas, the legislation would require the USDA to create and maintain a beef contract library.
As the letter points out, this is not a new concept and is currently available for other livestock species. The goal is to allow cattlemen an opportunity to compare and have awareness of other contracts to negotiate favorable terms. Third, it would increase the window of reporting cattle committed to slaughter from the current seven days to 14 days.
And the final point in the letter is to ensure confidentiality, but report all information collected. This is targeted at regions where there are not enough market participants to report the market. Meaning, if only one packer is buying in that region, and there is not enough volume or other market participants to fully establish the market, the region will go unreported despite the information being collected.
The letter does finish up with the statement that these groups “do not ask for any type of market manipulation or guaranteed profit. We simply ask for the information to be made readily available to allow cattle producers the ability to make informed and educated decisions that will best benefit their operation.” I appreciate that this statement was included in the letter. I feel that we as an industry have not looked to the government for a handout but can understand why these groups feel like they need to seek a legislative fix. As I have stated previously, I prefer a free market model with the least amount of government interaction.
I have heard the analogy that the government needs to serve like a referee at a high school sporting event. They should allow all participants to play the game fairly, with the knowledge that if they break the rules there will be consequences. Also, as the game changes, the rules need to be updated accordingly too.
I am naturally an optimistic person. I like to believe that when we get through the unforeseen challenges from the last 18 months, the market will be good. People like beef. Period. Consumers are still buying beef. I do realize that the margins are not spread evenly through the respective segments, but I do not know of a time when they ever have been. I get as excited as anyone when calf prices are high, fed cattle prices are high, and everyone in the beef industry is making money.
That being said, I do not think it is fair to tell someone that they are making too much money and not be allowed to do business as usual because of a perceived unfairness. I think that is a slippery slope to go down. Regardless of the outcome, I hope we look back a year from now and find ourselves in more profitable times. — DEVIN MURNIN