Ag Policy Blog

Cattle Markets Hearing Will Have a Lot to Unpack

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Sen. Charles Grassley, R-Iowa, will be among the rural-state senators looking forward to the hearing Wednesday on the cattle markets and lack of transparency in those markets. (DTN file photo)

The state of cattle markets will be the focus of a Senate Agriculture Committee hearing on Wednesday, but the divergence between how a senator sees meatpackers -- and how the packers see themselves -- is apparent from some comments and a position paper on Tuesday.

Sen. Charles Grassley, R-Iowa, will be among the rural-state senators looking forward to Wednesday's hearing on the cattle markets and lack of transparency in those markets.

"Independent cattle farmers are losing money on each head of cattle while the packers are profiting $1,200 per head," Grassley said, noting one week the profits fell to $800 per head. "But can you believe $800 or $1,200 when the price for the consumer hasn't gone down any and the farmer is losing money? So these farmers have every reason to be fed up with the anti-competitive practices in the marketplace."

Grassley added that it's also important to remember that, on average, less than 20% of the daily cattle slaughter is from a negotiated spot market. "The system is broken when there's a high demand for beef at the grocery stores, and consumers are paying a high price, but the cattle producers are barely making ends meet."

Grassley and Sen. Jon Tester, D-Mont., introduced legislation seeking to have 50% of daily kill nationally come from the spot market. Nebraska Sen. Deb Fischer, R-Neb., introduced similar legislation seeking the same approach on a regional basis. When asked about complaints that a 50% spot market isn't how they market cattle in states such as Texas, Grassley said he had heard similar complaints. "But I don't represent Texas, and from that standpoint, I think we have got to look at the whole market," he said, saying there needs to be compromise. "But we've got a major problem when four packers control everything, and I don't like hearing senators say they don't want to offend the packers. The packers are the problem."

Cue the North American Meat Institute (NAMI), which on Tuesday submitted comments to Agriculture Secretary Tom Vilsack about resiliency of agricultural supply chains. While noting the pandemic "may be the ultimate black swan event," the packers' lobby group said that "does not automatically mean the system needs to be torn down and rebuilt. The pandemic has spawned some new bad ideas, and resurrected other bad ideas, seemingly without recognizing certain economic realities."

The market, according to the packers, is not broken. After first pointing out that Americans spend less of their disposable income on food than any other country, NAMI stated in its letter that comments about increased consolidation and concentration are misplaced. The Packers and Stockyards Division of the Agricultural Marketing Service is monitoring the industry. The Big Four packers control just slightly more Fed Cattle slaughter than 1994, -- about 85% -- and that has not precluded other sectors of the industry from being profitable, NAMI stated.

NAMI stated also that legislation that would allow state-inspected products to cross state lines without meeting federal standards "is ill-conceived." Of about 6,000 federally-inspected plants, more than 5,000 of them are considered "small or very small." NAMI effectively stated if those plants can do it, so can others.

And NAMI also frowns upon USDA's recent announcement to resurrect proposed rules from the Obama era. Tighter rules in the Packers & Stockyards Act "would adversely affect consumers, producers and packers." NAMI is particularly concerned about potential rule changes that would make it easier for a producer to sue packers by not having to prove that a packer's actions against a producer "adversely affected competition." NAMI cites the repeated court rulings in its favor over that clause to demonstrate change is not needed in how P&S is enforced.

NAMI statement to USDA. https://www.meatinstitute.org/…

NAMI won't be at the table on Wednesday when the Senate Agriculture Committee holds its hearing. The committee chairwoman and ranking member on Tuesday released the witness list for the hearing titled, "Examining Markets, Transparency, and Prices from Cattle Producer to Consumer."

Justin Tupper, Vice President, United States Cattlemen's Association, St. Onge, S.D.

Mark Gardiner, Partner, Gardiner Angus Ranch, Ashland, Ks.,

Glynn T. Tonsor, Professor, Department of Agricultural Economics, Kansas State University, Manhattan, Ks.,

Dustin Aherin, Vice President, RaboResearch Animal Protein Analyst, Rabobank, Chesterfield, Mo.

Mary K. Hendrickson, Associate Professor, Division of Applied Social Sciences, University of Missouri, Columbia, Mo.

The hearing is set for 1:30 p.m. Central on Wednesday and a livestream can be viewed here: https://www.agriculture.senate.gov/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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