The beef industry is going to have some wild times on Capitol Hill the last week of April, as the House Ag Committee will hold a hearing April 27 called “An Examination of Price Discrepancies, Transparency and Alleged Unfair Practices in Cattle Markets.” We have already had a half-dozen hearings on cattle markets. And the markets worked fine last week—over 100,000 head traded between $143-147 on the negotiated cash markets. Some will see this as justification for the proposed laws.
The committee has invited the CEOs from Tyson, National Beef, JBS and Cargill to testify. This will be a very interesting hearing that could lead to unpleasant legislation. The Senate Ag Committee is also holding a hearing on April 26 on the proposed Cattle Price Discovery and Transparency Act.
One can almost feel the tension building that something is going to happen. President Joe Biden spoke about the beef industry and packer profits in his State of the Union address, so this administration is going to do something drastic in the meat business. Most of these meat packers are caught up in poultry and pork price fixing cases and are finding it easier and cheaper to negotiate their way out and make big settlements to avoid liability. Smithfield handed over $42 million last week. You know these CEOs have targets on their backs.
I’m assuming this will be the ultimate packer bash. Can you envision Cory Booker, the vegan Democratic senator from New Jersey, questioning these CEOs? Booker is more prone to deliver a monologue than questions. This is going to be prime entertainment for our beef industry.
Do we really want these senators messing with the marketing channels that feeders and packers have come up with? You need to remember that it was the big cattle feeding companies that came up with alternative marketing agreements. These arrangements have made for a consistent supply of Choice and Prime beef, and they created great demand for beef.
It will be interesting who will testify in the Senate Ag Committee’s hearing; I haven’t seen the list yet. I wonder what the questions about unfair practices in the cattle markets will be like. Perhaps the Justice Department is going to reveal what they have found in their beef industry investigation we’ve been expecting for over two years.
The proposed legislation still has a long way to go and more than likely will expire with this Congress and have to start over in the next session, and by that time, cattle markets are expected to be much better. One thing that seems clear from folks I’ve visited with is the government won’t be able to improve cattle markets or any other commodity markets with regulation.
I can’t wait to see what they come up with to amend the 100-year-old Packers and Stockyards Act. The packing industry is one of the most highly regulated industries in the country, and I don’t know if they really care about more regulation.
Now we have R-CALF USA pulling away from the proposed legislation. In a recent press release, they said, “Calling the cattle market section an ineffectual reform to the abject market failure plaguing the U.S. fed cattle market since 2015, and further stating that the reforms decisively favor the status quo, the group states Congress is giving the USDA carte blanche as to whether the packers will be required to change their current procurement practices and is giving the USDA two years to make its decision.”
They cite an Iowa State University study that concluded, “At some point since 2005, the largest beef packers in the U.S. began moving toward multiplant coordination. This business practice is highly related to other often-discussed industry features such as concentration levels, geography and transportation costs, alternative marketing arrangements, and cattle cycles and packing capacity. As we show, beef packers employing multiplant coordination leads to wider spreads between downstream beef prices and upstream fed cattle prices.” The use of technology has also helped the packing industry become more efficient.
Meanwhile, it continues to be dry, and grains have gone through the roof. Corn is over $8, and the cost to add a pound to a fed steer is at $148, just about the cost of the feeder steer per hundredweight. All feedstuffs are in short supply, and cow slaughter is on the rise, up 9 percent year to date. However, prices for slaughter cows and bulls are at a high point.
Look at the beef trim markets; fresh 90 percent lean trim is trading at $285, and 50 percent lean is at $118. I’d say the demand for ground beef is very good and could get a bit stronger going into the summer months. Pray for rain. — PETE CROW
