BIRMINGHAM, Ala. (DTN) -- Many in the cattle industry are convinced prices would be better for feeders if there were more transparency in the spot market. There appears to be little consensus around that issue, however, judging by a panel discussion during USDA's 97th Annual Agricultural Outlook Forum.
Glynn Tonsor, Kansas State University ag economist; Lee Schulz, Iowa State University ag economist; and William Hahn, USDA-ERS economist, gave presentations under the theme "Challenges to Livestock Market Transparency." Attendees looking for specific solutions pertinent to market transparency in the cattle industry may have felt the discussion too "thin" on details.
Tonsor spent the most time addressing the subject, but he did not discuss specific plans. He noted there were multiple efforts underway to increase activity in spot negotiated cattle markets, some of those being calls to force a degree of transparency via legislation. Asked his thoughts on legislative proposals for a 50% negotiated sale requirement, he noted that, while there is economic value in a robust spot market regularly reported, any attempt to try to force more volume in markets will come at a cost.
"The industry has evolved the way it has for a lot of reasons," Tonsor said, adding commentary about adapting, modifying and having resilience in the supply chain does not align well with how normal spot markets work.
"If we change one thing, four more will follow," he cautioned. "We have to be careful about forcing change because it will have consequences. There is no free lunch."
Tonsor added research is underway to look at options to improve spot market price reporting. He said it is important to recognize there is resilience in the U.S. meat supply chain, demonstrated by recovery after the COVID-induced deep dive the cattle market took in April and May 2020.
"Embedded in that [resiliency] is volume of spot trade, and that is a topic with decades of discussion. Some of the proposals we are looking at today take the industry away from a free-market philosophy, and I share concerns others have over that," he said.
While presenters did not take positions in favor of, or against, specific legislative solutions to increase market transparency, the elephant in the room was clearly price reporting legislation put forth by Sen. Charles Grassley, R-Iowa.
In May 2020, Grassley introduced recycled legislation aimed at amending the Agricultural Marketing Act (AMA) and requiring packers to acquire no less than 50% of the cattle they will process within 14 days through spot-market cash sales from nonaffiliated producers. Today the bill has bipartisan support, with 11 cosponsors, including senators from the states of Montana, Iowa, Mississippi, Louisiana, New Jersey, South Dakota, Minnesota, North Dakota and Oregon.
Similar provisions to Grassley's bill were added to legislation introduced last week by six Senate Democrats, the Justice for Black Farmers Act. That bill includes several provisions to amend the Packers and Stockyards Act. The bill expands definitions of unlawful practices for forward contracts, including prohibiting packers from owning livestock more than seven days before slaughter. Packers would also be required to buy 50% of their daily livestock slaughter through spot market sales.
Victoria Myers can be reached at firstname.lastname@example.org
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