Cattle Orgs Working on Market Solutions

OMAHA (DTN) -- Seventeen state cattle organizations have written the leadership of the House and Senate Agriculture Committees backing legislation that would give the U.S. agriculture secretary authority to set regional minimum negotiated cash trade sales for cattle across the country.

The letter of support for legislation backs one of multiple bills that have been introduced by members of Congress to provide more transparency and cash trade in cattle markets. The letter also reflects a divide as all 17 state groups that signed the letter are affiliates of the National Cattlemen's Beef Association, which last week sent a letter to members calling for a voluntary program to achieve higher negotiated trade.

The 17 state groups are the Alabama Cattlemen's Association; Arkansas Cattlemen's Association; Georgia Cattlemen's Association; Iowa Cattlemen's Association; Illinois Beef Association; Minnesota State Cattlemen's Association; Mississippi Cattlemen's Association; Missouri Cattlemen's Association; Nebraska Cattlemen; New Mexico Cattle Growers Association; North Dakota Stockmen's Association; Ohio Cattlemen's Association; Oregon Cattlemen's Association; South Dakota Cattlemen's Association; Tennessee Cattlemen's Association; Wisconsin Cattlemen's Association and Wyoming Stock Growers Association.

The state groups back a bill introduced last month by Sen. Deb Fischer, R-Neb., and Rep. Vicky Hartzler, R-Mo., called the "Cattle Market Transparency Act of 2020." The lawmakers highlight that declines of cash cattle sales have varied throughout the country over the past 15 years. Negotiated sales have dropped 40% in the Texas-Oklahoma-New Mexico region, but the cash market has dropped just 16% in Iowa and Minnesota.

The bills introduced by Fischer (S. 4647) and Hartzler (HR 8557) would require USDA to determine regional mandatory negotiated cash trade levels across the country. Meatpackers would be required to report the number of cattle scheduled for slaughter delivery each day for the next 14 days -- a requirement that already exists in the pork industry. Packers would also be required to maintain a library of marketing contracts between packers and producers, and require packers to provide that information to USDA. Packers could face civil penalties of up to $10,000 for each violation if they fail to meet minimums on negotiated cash trade.

Cattle markets have stabilized in recent months but the pandemic and market reactions earlier this year raised concerns throughout the industry about price discovery. As cattle producers received less for their livestock due to packing houses idling, the packers themselves were getting record prices for boxed beef. A year ago, a similar circumstance happened when a fire forced a temporary shutdown of a Tyson beef plant in Holcomb, Kansas.

Last spring, Sens. Chuck Grassley, R-Iowa, and Jon Tester, D-Mont., introduced a bill with four other senators that would set a minimum 50% cash trade in each state across the country. That bill also garnered support from groups such as the U.S. Cattlemen's Association.

NCBA created a working group on cattle markets at the group's summer meeting. Last week, NCBA President Marty Smith sent a letter to members on a plan, the "Voluntary Framework to Achieve Price Discovery in the Fed Cattle Market." The plan proposes NCBA's working group watch the negotiated cash trade over the next year and seeks "no less than 75% of the weekly negotiated trade volume that current academic literature indicates is necessary for 'robust' price discovery in that specific region." The plan states that if negotiated cash trade does not increase to appropriate trigger levels over the next year, NCBA's Regional Triggers Subgroup will recommend NCBA pursue legislation or a regulatory solution.

NCBA earlier this month announced support for bill introduced by several members of the House Agriculture Committee and others, led by Rep. Dusty Johnson, R-S.D., the "Price Reform in Cattle Economics (PRICE) Act." This bill mainly provides aid to smaller state-inspected packers including allowing state-inspected meat to be sold easier across state lines. But the bill does also include a proposal for a USDA economic study of the impacts of mandatory cash trade sales regionally.

The 17 state affiliates sent their letter to lawmakers backing the Fischer-Hartzler bill just days after Smith sent the NCBA report and recommendations to members. In their letter, the state affiliates told lawmakers, "Let us be clear, the thousands of cattle producers our respective organizations represent do not ask for any type of market manipulation or guaranteed profit. We simply ask for the information to be made readily available to allow producers the ability to make informed and educated decisions that will best benefit their operation."

Mike Deering, executive director the Missouri Cattlemen's Association, responded to DTN in an email that the policies of "nearly every state affiliate supports a voluntary approach, but we believe all option need to be on the table to bring forward long-term structural solutions to markets."

Deering added, "We cannot afford to wait to see if the 75% trigger is triggered to have a plan in place." Deering noted there was no need to wait for a solution when Fischer and Hartzler already have legislation that fits the solution.

"This legislation is a thoughtful, careful approach that should be palatable for all segments of the industry and bring meaningful change to the producers we represent," Deering stated to DTN. "In addition to robust price discovery, this legislation puts the widely supported contract library into action and modifies confidentiality guidelines to ensure full market transparency. This legislation carries out many of the suggestions made by USDA in their report following the investigation of the two black swan events -- the Kansas fire and COVID."

All of these legislative proposals and letters of support come as the Livestock Mandatory Price Reporting Act needs to be reauthorized. The act was extended in the continuing resolution passed by lawmakers in late September, but so far neither the House nor Senate Agriculture Committee has advanced any bills that would update the price-reporting law.

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

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