Western South Dakota's Only Ranch Station

AN OPEN LETTER: Market Transparency

South Dakota Representative Dusty Johnson (R-S.D.) recently introduced the Cattle Contract Library Act of 2021 (H.R.5609) requiring beef packers to provide details and types of forward contracts offered when purchasing fed cattle for slaughter.  South Dakota Stockgrowers Association (SDSGA), South Dakota’s oldest livestock producer association, did not endorse H.R. 5609.  SDSGA Marketing Committee reviewed the proposed bill and was disappointed with the absence of any inclusion for mandatory cash market trade levels.

SDSGA policy provides support for,” Complete reporting of non-reported cattle and beef prices including non-native cattle be required to facilitate true price discovery.”  However, SDSGA policy also urges that livestock forward contracts have a negotiated fixed base price in writing when they are entered into and that those contracts are traded on an open public market.

In 2021 SDSGA members and the South Dakota Legislatures overwhelmingly supported House Concurrent Resolution 6006 supporting the 50/14 mandate whereby packers would procure 50% of their weekly harvest on the cash market and take delivery within 14 days.  This resolution concurs with SDSGA policy and was transmitted to the members of South Dakota’s U.S.  Congressional delegation.  HCR 6006 conveys South Dakota’s overall agreement to increasing market discovery and transparency through greater cash market participation.

H.R. 5609 fails to include any mandatory negotiated cash market levels which are needed to establish a base price for both live cattle purchases, as well as alternative marketing agreements (AMAs). SDSGA policy calls for a fixed base price in writing which will not transpire under the current escalating trends of AMAs.

SDSGA member driven policy, Marketing policy (2), directs,” contracts entered into should be traded on an open public market” and is synonymous with the 1921 Packers and Stockyards Act section 202 (7 U.S.C. 192) (b) which refers to packers shall not give advantage to any particular person or locality.

Unanswered questions surrounding H. R. 5609 are, (1) Will the creation of a contract library, devoid of mandatory cash market transparency, become federal justification for non-traded private contract agreements thereby negating the 1921 P&SA?  (2) Will a contract library facilitate further industry regionalization bolstering packer justification for differing contracts and thereby creating further division among producers?

During the recent “Hearing to Review the State of the U.S. Livestock Industry” held by the United States House Committee on Agriculture, several participants including Representative Dusty Johnson related to the creation of a proposed beef contract library as building transparency similar with the 2010 hog industry contract library.  Since 1980 USDA Economic Research Service depicts the swine industry producer loss of 70% with an accompanying breeding herd loss of nearly 3 million head.  This was an industry where cash market discovery resources became annihilated leading to a current vertical integration situation.

South Dakota beef producers have long been disadvantaged by the current escalating use of non-negotiated contracts which have become another packer captive supply tool. These non-negotiated open-ended packer AMAs allow packers to avoid true market price discovery leaving producers with a “take it or leave it” marketing scenario.  SDSGA Director Chance Anderson, a rancher from Isabel S.D. said,” I don’t believe the library is a tool farmers and ranchers can really grab on to as markets are fluctuating widely and decisions have to be spontaneous”. Mr. Anderson further stated,” these are desperate times for rancher operations and normally we just take any peace-meal offering but time is running out and we need transparency with true results.”

South Dakota Stock growers worked tirelessly in conjunction with South Dakota legislators to pass HCR 6006 and convey the wishes of producers and rural communities while setting direction for our U.S. Legislators to follow when addressing market transparency.  Because of the absence of mandatory cash market discovery levels within H.R. 5609 SDSGA members believe Senate Bill S.949, a bill to amend the Agricultural Marketing Act of 1946 to foster efficient markets and increase competition and transparency among packers that purchase livestock from producers, is more relevant to true cash market discovery.  S.949, introduced by Senator Chuck Grassley (R-IA) and includes (9) cosponsors including S.D. Senator Mike Rounds (R-SD).  S.949 addresses the transparency solutions expressed in South Dakota’s HCR 6006 and SDSGA encourages all cattle producers to seek congressional support for S.949 to maintain true cash market transparency for rebuilding rural America.

Vaughn Meyer
South Dakota Stockgrowers Association

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