Current cattle market daily headlines for October 26, 2021

by | Oct 26, 2021 | 0 comments

Cattle contract library legislation advances

According to AgWeb, by unanimous vote, the U.S. House Agriculture Committee passed the bipartisan Cattle Contract Library Act of 2021 (H.R. 5609) on Thursday.

Introduced last week by Rep. Dusty Johnson (R-SD) and Rep. Henry Cuellar (D-TX), the Cattle Contract Library Act would establish a library of contracts for the Agricultural Marketing Service to report terms of alternative marketing agreements between packers and producers. Supporters of the bill say it would greatly increase transparency in cattle markets as cattlemen are currently unaware of contract terms being offered by packers – which Johnson credits for the decline in leverage for smaller producers during price negotiations.

The legislation would require the agriculture secretary to establish and maintain a library or catalog of each type of contract offered by meat packers to producers for the purchase of fed cattle, including any schedules of premiums or discounts associated with the contract. The measure would require that all collected information, from type of contract to base price and transportation arraignments, be made publicly available. The bill also requires the U.S. Department of Agriculture (USDA) to publicly report the total number of cattle that beef packers have committed to them six months and 12 months into the future.

Rep. Johnson said the bill is the result of nearly a year of work with producers and industry leaders following the July 2020 Boxed Beef & Fed Cattle Price Spread Investigation Report which recommended the creation of a cattle contract library.

During an interview with Chip Flory on AgriTalk Thursday, NCBA Director of Government Affairs and Government Regulatory Policy, Tanner Beymer, said the cattle contract library has “broad support from all sectors” and has been a longstanding priority for NCBA.

While the National Cattlemen’s Beef Association came out in support of the bill, other industry groups were less enthusiastic.

According to Farm Progress, R-CALF USA is the only cattle industry group to not support the bill as approved by the committee.

R-CALF USA’s board of directors reviewed the bill and determined it does not address the competition-disrupting leverage that the highly concentrated beef packers now hold over the cattle market and that modern methods of cattle procurement being used by the largest beef packers may fall outside the scope of the bill.

“The problem with our broken market is not that we don’t know the details of the contracts that confer market leverage to the packers, the problem is there are too many contracts and because of that, our price discovery market is being destroyed,” says Iowa cattle feeder and R-CALF USA Director Eric Nelson.

Nelson says S.949, also known as the 50/14 bill, addresses this serious problem by increasing the volume in the price discovery market and decreasing the volume of contracted cattle which forces the meatpackers to compete in the price discovery market by purchasing, at least, half of their cattle from that market and then slaughtering them within 14 days so they’re not able to also use those for captive supply cattle.

He said the mandatory Country of Origin legislation is also needed, and that a contract library could be helpful, but only after a competitive market is established. Farm Progress reported Nelson reiterating that putting a contract library ahead of taking action to preserve the price discovery market sends a signal that more contracts are good and more producers should try to access them – which is not what the organizations believes is needed.

Likewise, the North American Meat Institute withheld support for the bill entirely until further understanding the implications of its requirements.

President and CEO of the Meat Institute, Julie Anna Potts, said “More time is needed to consider how the bill will affect livestock producers, feedlot operators and packers and processors.” Due to the limited time allowed to consider the legislation, on behalf of the North America Meat Institute, Potts asked the House to pause and include packers in the conversation, stating that “the packers would bear the burden of complying with this new government mandate.”

The bill comes as Congress begins to lay out what it hopes to include in the Livestock Mandatory Reporting bill set to expire Dec. 3, but must be approved by the full House and would also need Senate consideration before it could be signed into law.


United States cattle on feed down 1 percent

National Beef Wire reported cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 11.6 million head on October 1, 2021 – 1% below October 1, 2020’s inventory, but the second highest October 1 inventory since the series began in 1996.

The inventory included 7.07 million steers and steer calves, down 3 percent from the previous year. This group accounted for 61 percent of the total inventory. Heifers and heifer calves accounted for 4.49 million head, up 2 percent from 2020.

Placements in feedlots during September totaled 2.16 million head, 3 percent below 2020, while marketings of fed cattle during September totaled 1.79 million head, 3 percent below last year’s numbers.


Is there a constitutional right to food? Mainers to decide

AP News reports that in the Nov. 2 election, voters will be asked if they favor an amendment to the Maine Constitution “to declare that all individuals have a natural, inherent and unalienable right to grow, raise, harvest, produce and consume the food of their own choosing for their own nourishment, sustenance, bodily health and well-being.”

The proposal is essentially “the 2nd Amendment of food,” said Republican Rep. Billy Bob Faulkingham, who proposed the amendment, likening it to the U.S. constitutional amendment that assures the right to bear arms. He says it’s a common-sense amendment that would make sure the government can’t stop people from doing things like saving and exchanging seeds, as long as they don’t violate public or property rights.

Faulkingham and others said the amendment is a response to growing corporate ownership of the food supply, and a way to wrestle control from big landowners and giant retailers.

Depending on whom you ask, Maine’s proposed “right to food” amendment would simply put people in charge of how and what they eat — or would endanger animals and food supplies, and turn urban neighborhoods into cattle pastures.

For supporters, the language is short and to the point, ensuring the right to grow vegetables and raise livestock in an era when corporatization threatens local ownership of the food supply, a constitutional experiment that has never been tried in any state.

For opponents and skeptics, it’s deceptively vague, representing a threat to food safety and animal welfare, and could embolden residents to raise cows in their backyards in cities like Portland and Bangor.

Julie Ann Smith, executive director of the Maine Farm Bureau, the largest farmers advocacy organization in the state, argued the language of the amendment is so broad that it could make the food supply less safe.

That’s a problem in a state where potatoes, blueberries, maple syrup and dairy products are all key pieces of the economy, she said. The amendment could empower residents to buy and consume food that isn’t subject to inspections, proper refrigeration and other safety checks, Smith worried.

Smith emphasized the organizations unrest over the language ‘to consume the food of your own choosing,’ stating that it is too broad and dangerous with the potential to cause serious problems in food safety, animal welfare.

Smith said the farm bureau is also concerned that the amendment could override local ordinances that prevent residents from raising livestock anywhere they choose.

Mark Brewer, a political scientist with the University of Maine agreed with criticism that the amendment is so vague that it’s unclear what it would actually do.

“I’d be more interested in how it could play out in the courts,” Brewer said. “If you want to raise cattle within the city limits when city laws say you can’t, but the Constitution says you can. Then what happens?”

For Penobscot farmer, Heather Retberg, the concerns about cows turning up in cities are a silly distraction from the real goal of the proposal.

“This shifts the power to the individuals in a rights framework, instead of the corporations,” Retberg said. “It gives us more voice in how we want our food systems to be, and how we want our communities to look.”

Supporters of the proposal, including Faulkingham, said that local rules would still be enforced, and that the amendment would not mean you could do things like raise chickens anywhere you want or fish commercially without a license.

The amendment proposal is an outgrowth of the right-to-food movement, sometimes called the food sovereignty movement, which has expanded in recent years in Maine and states around the U.S. and Canada.

The movement comprises a patchwork of small farmers, raw milk enthusiasts, libertarians, back-to-the-land advocates, anti-corporatists and others who want to ensure local control of food systems.

Maine enacted a food sovereignty law, the nation’s first of its kind, in 2017. The law allows local governments to OK small food producers selling directly to customers on site. The law was especially popular with sellers of raw milk, which can be legally sold in Maine but is more restricted in many other states.

The nationwide food sovereignty movement has yielded similar laws in states including Wyoming, Colorado, Montana and North Dakota, and pushes for the same elsewhere.


Drought, heat will further tighten hay supplies

Capital Press reported that drought has taken its toll on hay production in the Northwest.

Jon Driver, an industry analyst formerly with Northwest Farm Credit Services and Washington State University and founder of Hay Kings social media group commented during a hay outlook webinar hosted by Northwest Farm Credit, “forage production saw a lot of disruption this year, especially in dryland areas such as Montana, southern Oregon, eastern Washington, northern Idaho and California’s Imperial Valley. We know that hay inventory was already low in Montana … and then we compound that with a second year of drought and greater intensity…”

USDA’s latest crop production report suggests the situation will worsen in Montana, where alfalfa production is forecast down 46.9% year over year on 50,000 fewer acres. The state’s other hay production is expected to be down 38.4% despite an additional 10,000 acres planted.

Montana is not alone. In Washington, Oregon and Idaho alfalfa production is expected to be down 5.8% on an additional 30,000 acres, while production of other hay is also expected to be down 14.3% in the region.

The drought’s impact will also be felt outside the Northwest while California’s other hay production is expected to be down about 4%. That’s not a drastic reduction, but it is lower.

Idaho’s other hay production is forecast down about 34% – a several-hundred-ton shortfall in that dryland grass hay, while the USDA forecasts Oregon’s other hay production 10% lower than last year.

Driver highlighted the different climate regions in the state of Oregon, but noted that even on the west side of the state that grass hay production was down because of temperatures well over 100 degrees, with instances of 118 degrees in Washington.

Those high temperatures extended into the Willamette Valley and along the west coast of Washington where hay production was subsequently down in each of those regions.

Other hay production in Washington is largely irrigated grass hay on the west side. The exception is the Northeast corner, which got hit particularly hard, Driver said.

While he’s is not sure he agrees with USDA’s estimate of Washington’s grass hay production only showing a slight decline, he emphasized that “the big picture here is that production is significantly lower in all of these production regions.”

While high temperatures “offend irrigated alfalfa just as much as dryland production,” Driver noted that when you add in smoke from the wildfires in August that one can only expect alfalfa tonnage to be down even on irrigated production.

USDA’s forecast of about a 9% decline in Idaho’s alfalfa production seems right to him, but he’s not so sure about the agency’s forecast for a 10% increase in California. He also thinks alfalfa production will be lower in Oregon than USDA’s forecasted 3.6% decline as there were irrigation shutoffs in the Klamath Basin – a large alfalfa producing region – despite other valleys having more normal production while still subject to high temperatures and smoke.


Larger livestock loans boost farm lending

According to the Federal Reserve Bank of Kansas City, the demand for livestock loans grew in the third quarter, boosting agricultural lending activity at commercial banks. Demand for operating loans was more subdued however, and total non-real estate lending remained near its average of the past decade. The average size of loans for some livestock categories reached an all-time high and contributed to the increased lending. While the average size of operating loans also remained elevated, a smaller number of loans limited the overall financing of operating expenses.

The U.S. agricultural economy generally remained strong as elevated commodity prices continued to support farm incomes. Although prices of most major crops were at multi-year highs moving into fall harvest and supported farm revenue prospects, weakness in the cattle industry persisted as low cattle prices continued to limit profit margins for producers while concerns about drought and higher input costs continued to intensify and likely contributed to an increase in producers’ financing needs in the livestock sector.

The volume of non-real estate farm loans increased in the third quarter, but some types of lending remained limited. Total non-real estate lending was about 8% higher than a year ago but has declined at an average pace of about 2% over the last four quarters. A large share of the increase during the quarter was due to an increase in loans used to finance feeder livestock and other livestock, which grew by about 20% and more than 50%, respectively.

With sharp increases from a year ago, lending for livestock purchases continued to trend above the recent historical average for the third quarter. The volume of loans for poultry and livestock other than feeders was nearly double the inflation adjusted average during the same quarter from 2010-2019.

Feeder livestock loans were also slightly greater than the recent average while operating loans were slightly less.

The increase in livestock loan volumes was driven by larger loan sizes. The average size of loans for other livestock continued a sharp upward trend, increasing about 30% in the third quarter and reaching an all-time high. The number of other livestock loans was also higher than a year ago but remained historically low. Similarly, the average size of feeder livestock loans has also increased steadily over the past year, but the number of loans declined for the fourth straight quarter.

While the size of livestock loans increased sharply, the growth in the size of operating loans was less pronounced. The average size of operating loans remained elevated but was only about 5% larger than a year ago. The number of operating loans continued to trend downward and remain historically low, limiting any gains in loan volumes.

Alongside an increase in loan sizes, interest rates remained low, and loan durations were higher than recent averages. Rates charged on all types of loans except operating loans declined slightly from a year ago and reached an all-time low for the third quarter. The average maturity of all types of loans, except machinery and equipment loans, were higher than a year ago as well.


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