STURGIS, SD – Decades of political infighting among the nation’s cattle organizations may be turning a corner. If nothing else, the fact that representatives from these organizations sat across the same table, in the same room, to talk about the same concern, seeking a remedy, is nothing short of history-making.
Representatives from six of the largest ag and cattle industry groups met recently to discuss the price imbalance in the cattle supply chain. In the past, each of these organizations have responded to one market crisis after another (what the trade is now calling black swan events) with different proposals and policies – effectively fragmenting any message being brought before federal agencies and Congress.
According to reports, the groups meeting behind doors closed to the media, were the National Cattlemen’s Beef Association, R-CALF, US Cattlemen’s Association, American Farm Bureau, National Farmers Union, and the Livestock Marketing Association.
It’s assumed the goal is to come to a consensus about how to go forward with market reforms to restore fundamentals in the cattle trade that will allow for realistic economic margins for all segments in the cattle supply chain.
The road that has brought America’s cattle industry to this point is filled with the debris of ill-advised (and at times, well-intentioned) marketing, regulatory and legislative changes.
The Packers & Stockyards Act (P&SA) in 1921 (which has been amended several times over since passage) was to serve as the gate-keeper against the fall-out from many of those changes that some would argue have fostered monopolistic practices.
In the words of the Congress, the purpose of the P&SA is “to assure fair competition and fair trade practices, to safeguard farmers and ranchers . . . to protect consumers . . .and to protect members of the livestock, meat, and poultry industries from unfair, deceptive, unjustly discriminatory and monopolistic practices.”
But for decades, enforcement of the P&SA has been curtailed or as many would argue, not enforced at all.
Among the most recent efforts to curtail the market influence the packing industry has come to exercise over the cattle supply chain and the lack of transparency in price discovery, is the National Cattlemen’s Beef Association’s “75%” Rule that went into effect January 2021.
NCBA favors a voluntary approach in an effort to avoid government intervention through a legislative or regulatory remedy. The Voluntary Framework to Achieve Price Discovery in the Fed Cattle Market, instructs NCBA’s working group to monitor the negotiated cash trade during 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 a specific region. Only if the negotiated cash trade fails to increase to appropriate trigger levels over the next year would NCBA pursue legislation or a regulatory solution.
According to an analysis of the first quarter of the NCBA“75%” Rule, overall, across weeks and feeding locations voluntarily participating, 19.23% of location-weeks violated the 75% rule. The quarterly report also showed no voluntary participation from packers which brings into question NCBA’s attempt at a voluntary approach.
Lawmakers have also been developing their proposals.
In September 2020, Senator Deb Fischer, R-Neb., a member of the Senate Agriculture Committee, introduced the Cattle Market Transparency Act of 2020, legislation she says would restore transparency and accountability in the cattle market by establishing regional negotiated cash minimums and equipping producers with more market information.
A companion bill to the Cattle Market Transparency Act of 2020 was introduced by Missouri Rep. Vicky Hartzler, R-Mo., which the Congresswoman says enables mechanisms for greater price discovery and transparency within the cattle market.
Then in May 2021, Senators Chuck Grassley, R-Iowa, and John Tester, D-Mont., introduced legislation, referred to as the 50/14 rule, that would require “large-scale meatpackers to increase the proportion of negotiable transactions that are cash, or “spot,” to 50% of their total cattle purchases.” That proposal, covering facilities that slaughter over 125,000 head of cattle each year, is intended to “improve the accuracy of formula pricing… and increase transparency for producers and feeders.”
According to representatives from one of the groups attending the closed-door meeting it was a robust discussion and the groups found they had more in common with each other than they initially thought.
A news release detailing the outcomes of the meeting is expected early next week.