USDA has finalized its rule to create a Cattle Contracts Library Pilot Program. Under the new rule, packers that slaughtered an average of 5% or more of the national number of fed cattle slaughtered in the last five years will be required to submit contractual information for the purchase of cattle.
The library will include information about different types of contracts and contract terms, including:
• Contract terms on any schedules of premiums or discounts.
• Delivery and transportation.
• Terms and payments.
• Financing.
• Risk-sharing or profit-sharing.
• The number of head purchased.
• Other financial arrangements.
Funding was allocated under the Consolidated Appropriations Act of 2022 for USDA’s Agricultural Marketing Service (AMS) to create a pilot program to increase market transparency for cattle producers. AMS has been gathering stakeholder feedback since April for the program and created a working model with inactive contracts for testing purposes.
Packer requirements
Under the pilot program, packers will be required to report to AMS with contract information for the purchase of cattle and the number of actual and estimated cattle purchased under active contracts within certain time frames. AMS will only collect contract terms without any personally identifiable information for confidentiality purposes.
According to the rule, “Based on feedback from industry stakeholders, including those who voluntarily submitted contract information, AMS determined the Pilot needed to be mandatory; otherwise, the Cattle Contract Library would be incomplete, and the information would be potentially misleading if packers self-select the contract terms they provide,” just as the Swine Contract Library is mandatory for packers.
According to USDA, the following contract clauses must be submitted: contract method, contract start and end dates, base price source and adjustment, selling basis, premiums and discounts, specifications relating to cattle attributes, delivery and transportation terms and payments, financing, risk-sharing, profit-sharing or other financial arrangements, and volume provisions.
On a monthly basis, packers will be required to submit the number of actual cattle purchased under active contracts in the prior month, along with the estimated maximum number of cattle to be purchased under active contracts for slaughter in the current calendar month.
The final rule was posted in the Federal Register on Dec. 7 and goes into effect on Jan. 6, 2023. Beginning on that date, packers must submit the required contractual clauses for each active contract, regardless of whether the contract is written or oral. Packers will then be required to submit the same information for each new active contract, along with any changes to previously submitted active contracts.
“Because the packers prepare these contracts in advance of their offering those contracts to producers, AMS determined these submission timeframes to be reasonable,” the rule read.
To view the final rule in its entirety, search for docket number AMS-LP-22-0065 at federalregister.gov. AMS plans to host a cattle industry listening session in early January to discuss the pilot program prior to its official rollout.
Industry support
The National Cattlemen’s Beef Association (NCBA) welcomed the final rule and said it was looking forward to continuing to work with USDA as the pilot program launches. “We are pleased that USDA listened to feedback from stakeholders like NCBA while crafting the final rule on the Cattle Contract Library Pilot Program,” said NCBA Senior Director of Government Affairs Tanner Beymer in a statement.
“We are hopeful that this pilot program will strike an appropriate balance between offering cattle producers additional insight into the market while also protecting their proprietary business information.”
Sen. John Hoeven (R-ND), lead Republican on the agriculture subcommittee within the Senate Committee on Appropriations and a staunch supporter of the measure, also applauded the rule’s finalization.
“This cattle contract library that we worked to secure at AMS will serve as an important resource to America’s livestock producers, giving them more of the information they need to get the best price and terms for the sale of their cattle,” Hoeven said in a news release.
“At the same time, we continue working to strengthen enforcement of our laws, while opening new opportunities for producers to sell their products. That means more competition in cattle markets, which ultimately benefits both ranchers and consumers.” — Anna Miller, WLJ managing editor
