AUDIO: Cattle Feeder Troy Stowater explains NCBA’s voluntary framework to achieve robust price discovery

by | Nov 11, 2020 | 0 comments

Photo Credit Troy Stowater

 

Q: What do you think are the major issues standing in the way of fair cattle markets?

The biggest issues facing the cattle industry is the lack of price discovery and the fact that we have more cattle than we do packing capacity.

 

Q: What solutions do you think could be implemented to solve these issues?

NCBA recently released a voluntary program to increase negotiated cash trade to achieve robust price discovery.

When it comes to a lack of packing capacity, it is going to take an investment and economic incentives. The hog industry has seen four new packinghouses built by producers in recent years; it would be beneficial if the cattle industry could follow suit.

 

Q: According to Dr. Stephen Koontz, NCBA’s main economist, the packers need to purchase 86,000 hd. of cattle per week to achieve robust trade. Why is NCBA only requiring 75 percent of that?

The 75 percent is an introductory level; it will increase as time goes on. Seventy-five percent was chosen to give the packers a chance to make this approach work.

 

Q: Nebraska Cattlemen along with numerous other state cattlemen’s affiliates have signed onto a letter endorsing Senator Fischer’s Cattle Market Transparency Act of 2020. What are your thoughts on this?

Senator Fischer is trying to champion Nebraska Cattlemen’s cause. There is an opportunity to get robust price discovery, and Senator Fischer has shown that she is a friend of the Nebraska Cattlemen’s Association.

Even though Nebraska Cattlemen signed onto this letter, they stand with NCBA’s voluntary approach to achieve robust price discovery.

 

Q: What are your thoughts on the CME’s increased expanded limits?

The CME increased the live and feeder cattle limits because they wanted to be more consistent across all commodities. This decision was driven off the index funds and their complaints.

 

Q: What are your thoughts on the DOJ’s investigation into the big four beef packers?

This investigation is long overdue. When the big four beef packers were allowed to occupy 80 percent of the capacity, they agreed to compete. The DOJ needs to have an ongoing oversight to make sure they are competing in a competitive marketplace.

 

Q: Do you think there is a place in the cattle industry for MCOOL?

Voluntary country of origin labeling is sufficient. The studies show that people aren’t willing to pay for the extra cost of country of origin labeling.

Labeling beef as product of the USA isn’t appealing enough for consumers, we need to be more specific such as stating whose ranch or farm the product comes from.

 

Q: Do you think the cattle industry is in danger of becoming vertically integrated?

No, the trend is actually going the other way. We don’t have any major packers involved in the cattle feeding industry directly today.

 

Q: What do you see happening to the cattle industry if substantial changes aren’t made?

Leverage has always been an issue in the industry; both in terms of lack of robust price discovery and not enough packing capacity. Somehow the industry needs to achieve robust price discovery and we can solve the issue of packing capacity by either shrinking the cowherd or increasing packing capacity. It’s a shame that we might have to shrink the cowherd when there is such a high demand for beef.

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