Photo courtesy: National Cattlemen’s Beef Association
Q: Can you explain NCBA’s increased negotiated cash trade policy that was voted on at their summer meeting (July 27-30, 2020) in Denver ?
Two fed cattle policies were proposed at the meeting last week.
One of these policies was led by a northern coalition made up of Iowa, Nebraska, Missouri, and one of the Texas Cattlemen’s groups representing the cow calf producers in that state. There was about twenty-five or twenty-six states that had signed onto this northern fed cattle policy. This policy stated that NCBA would support a regulatory or legislative solution to increase the number of negotiated cash trade up to a robust number established by research supported and funded by NCBA.
The second policy had similar wording to the northern policy, but was absent of anything that would allow for any kind of regulatory or legislative mandate. It was completely voluntarily based and essentially had no teeth; no backing to really cause negotiated cash trade to increase.
Q: What defines a robust market?
Dr. Stephen Koontz of Colorado State University, a respected economist within NCBA, has done research that has produced different numbers by region that show what each region needs in order to achieve robust price discovery. This robust number could theoretically change with updated research. Koontzs’ research is at best four years old and some of it up to fifteen to eighteen years old. NCBA needs to continue their research to truly determine what fair, robust pricing is across the different regions.
Q: Do you think the market will correct itself in the next 90 days, or do you think that we will end up needing a legislative or regulatory mandate?
In my own opinion, I don’t think Texas and Kansas, where we see a definite lack of negotiated cash trade, will be able to voluntarily move those numbers to achieve robust pricing. Their system has evolved into a vertically integrated system entrenched with formula cattle; going forward it will be difficult for producers in that area to move away from this system.
Q: If the market does end up correcting itself in the next 90 days, and as time goes on we slowly work back to where we are today with minimal negotiated cash trade, how will the NCBA policy handle that kind of situation?
If we are able to achieve robust price discovery, but then we see these numbers decrease below what they should be, NCBA will step up to the plate and address the situation by again giving regions a set amount of time to increase those numbers. If that doesn’t work, a regulatory or legislative solution will be sought out.
Q: Is there anything else you’d like to touch on regarding NCBA’s summer meetings?
As producers, we need to decide whether or not we’re going to be part of the solution or problem when it comes to these issues facing our cattle industry. Folks need to get involved.