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National Cattlemen’s Beef Association has released the first quarter results of their voluntary 75% Plan, determining that a major trigger was tripped. Cattle graze in the Gravelly Mountain Range of Beaverhead-Deerlodge National Forest in Montana. Photo by Preston Keres/USDA.

Last October, the National Cattlemen’s Beef Association (NCBA) released their solution to increase price discovery in the fed cattle market: the 75% Plan. The first quarter results are in, and NCBA has determined a major trigger was tripped during the quarter. If a consecutive trigger is tripped during the second quarter, then NCBA will pursue legislative or regulatory action.

The plan is a voluntary framework with triggers based on regional levels of negotiated trade and packer participation. In order to avoid tripping triggers in any given quarter, each region must: Achieve at least 75 percent of weekly negotiated trade volume that is necessary for price discovery; achieve the threshold at least 75 percent of the reporting weeks in a quarter; achieve 75 percent of the weekly packer participation requirements; and achieve the packer participation threshold at least 75 percent of the reporting weeks in a quarter.

Each region was assigned a negotiated trade obligation to achieve price discovery, as determined by Dr. Stephen R. Koontz of Colorado State University. For example, for the region of Texas, Oklahoma and New Mexico, a total of 13,000 head a week would need to be purchased for robust price discovery. The 75% Plan obligation would require 75 percent of that number be purchased, so 9,750 head purchased a week.

At the time of the plan’s development there was not enough collected data to determine a packer participation silo, so it will be determined at a later date. NCBA is still finalizing details with the four major packers.

First quarter results

NCBA’s Live Cattle Marketing Working Group Regional Triggers Subgroup completed its evaluation for the first quarter and determined the Iowa-Minnesota and Nebraska-Colorado regions exceeded their thresholds under the plan. But the Texas-Oklahoma-New Mexico and Kansas regions fell short of their thresholds.

However, one of the weeks was during a major winter storm and the other was during scheduled maintenance at a major packing plant, which disrupted normal cattle flows. The two events justified invoking the force majeure provisions of the framework, although a major trigger was still tripped due to a lack of packer participation.

“Let me be clear, our producers deserve high praise for their diligent efforts to implement the voluntary framework this past quarter,” said NCBA President Jerry Bohn in a statement. “They offered cattle on a negotiated basis to comply with our framework, even when market signals were telling them to hold on to cattle in anticipation of higher prices.

“Often, these trades were made at a loss. We recognize the steps cattle producers have taken to address the need for greater price discovery and market transparency, and deeply appreciate their actions.”

He added that simply put, feeders can offer all their cattle on a negotiated basis, but the threshold is only achieved if there is a buyer willing to bid fairly on the offered cattle.

Bohn noted that, although the market fell short of the negotiated trade volumes outlined in the plan, there was still significant improvements made to price discovery since the framework’s implementation. He shared how negotiated trade is already up significantly year over year in the Texas/Oklahoma/New Mexico region.

“These gains were made despite residual COVID-19 disruptions, packing plant closures, natural disasters, and a volatile market,” Bohn said. “Cattlemen and women should be commended for their efforts to bring more price discovery to the marketplace. But we still have a ways to go.”

In response to the first quarter findings, Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA) claimed the plan did not increase the volume of negotiated trade and instead resulted in 2.2 percent less trades than the 2020 average.

“The cattle industry needs a real and immediate fix and the only meaningful solution offered to do that is Senators [Chuck] Grassley and [Jon] Tester’s Senate Bill 949, the spot market protection bill also known as the 50/14 bill,” said R-CALF USA CEO Bill Bullard in a statement.

“The cattle industry can’t wait any longer without risking a complete loss of its competitive marketing channels that are needed to sustain a competitive marketplace,” he said. — Anna Miller, WLJ managing editor

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