The National Cattlemen’s Beef Association (NCBA) has released its plan to voluntarily increase price discovery in the cattle industry.
The plan was developed by the association’s Live Cattle Marketing Working Group and is being called the “75% Plan.” The member-developed approach lays out a framework to increase negotiated fed cattle trade and incentive each of the major packers’ participation in such cash trade. The plan is designed to provide benchmarks for the industry to strive toward.
In a letter to industry stakeholders, NCBA President Marty Smith detailed how the plan will function. A subgroup will evaluate the weekly negotiated trade information for each of the USDA Agricultural Marketing Service’s cattle feeding reportion regions on a quarterly basis in arrears. Eventually, the Subgroup will include in its evaluation an analysis of packer participation data, but this information is not yet published under Livestock Mandatory Reporting.
Each region will need to achieve four metrics to avoid tripping price triggers. Those qualifications are:
- Achieve 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,
- Achieve this negotiated trade threshold no less than 75% of the reporting weeks in a quarter,
- Achieve no less than 75% of the weekly packer participation requirements, to be determined in short order, and assigned to each specific region
- Achieve this packer participation threshold no less than 75% of the reporting weeks in a quarter.
In the event that triggers are tripped in any two out of four rolling quarters, the Subgroup will recommend that NCBA pursue a legislative or regulatory solution to compel robust price discovery. The Subgroup will take into account black swan events on a case-by-case basis, and may allow for flexibility within the 75% Plan if events disrupt the normal flow of cattle in a quarter.
Periodic adjustments may need to be made to the framework in the event that academic literature is updated, technological advances are made, or other conditions of supply and demand have changed. The Subgroup will make these adjustments on an as-needed basis.
In the letter to stakeholders, Smith wrote, “While certainly not a silver-bullet solution, I truly believe that this approach provides the industry a goal to strive towards and, perhaps more importantly, a path forward if progress is not demonstrated toward that goal.
“I am confident that the cattle industry will meet this challenge as it always does: head-on and at full steam. Together we can ensure price transparency and robust price discovery in our markets.”
