Daily Headlines for November 12, 2021

by | Nov 12, 2021 | 0 comments

Beef Magazine reported that four US Senators have reached a compromise on measures they see as improving the cattle market, combining components of previously introduced bills in their new Cattle Price Discovery and Transparency Act as Congress works towards reauthorization of the Livestock Mandatory Reporting set to expire Dec. 3, 2021.

The four main sponsors include Sens. Chuck Grassley, R-Iowa; Deb Fischer, R-Neb.; Jon Tester, D-Mont. and Ron Wyden, D-Ore after Grassley and Tester had previously introduced a bill that competed with one led by Fischer.

In brief, this legislation would enhance price discovery and transparency by requiring packers to participate in the cash market on a plant-by-plant basis within each major cattle feeding region; creating a library of formula contracts; and expediting the report of average carcass weights to the public. It also requires a cost benefit analysis after two years to ensure the program is working as intended.

The creation of a cattle contract library is the most widely supported component of the bill. As the U.S. House Agriculture Committee unanimously passed the bipartisan Cattle Contract Library Act of 2021 (H.R. 5609) in action by the committee Oct. 21, the Senate proposal also requires the USDA to create and maintain a publicly available library of marketing contracts between packers and producers in a manner that ensures confidentiality.

The bill also requires USDA to release more timely information on carcass weights, and 14-day slaughter reporting – similar to what Grassley first introduced in his 50-14 plan. Specifically, it requires that a packer report the number of cattle scheduled to be delivered for slaughter each day for the next 14-day period. This tool can be used by producers to project estimated slaughter numbers and packers’ needs for cattle.

The bill also updates Livestock Mandatory Reporting definitions for “Fed Cattle,” “Heifer,” “negotiated grid purchase,” “regional mandatory minimums” and “steer,” and redesignates paragraphs of existing definitions as appropriate. Cattle Reporting Definitions are amended by revising the definition for “formula marketing arrangement,” and by adding “contract,” “type of contract” and redesignating paragraphs of existing definitions where appropriate.

A significant challenge facing the cattle industry is the declining number of participants in the negotiated cash market. In order to have robust price discovery that provides accurate information about market dynamics along the supply chain, the senators claim the market needs a competitive cash market with multiple price discovery points. Negotiated trade, also called the “cash” or “spot” market, increasingly has been replaced by formula pricing, forward markets and longer-term marketing agreements — collectively referred to as alternative marketing arrangements or AMAs.

In a summary of the bill, it explains today the bulk of formula pricing uses negotiated cash prices as the base in the formula — meaning information from the negotiated cash market is being heavily leveraged by nonparticipants, even as it declines in volume.

The shift from cash sales to AMAs has been more dramatic in certain regions. For example, from 2005 to 2018, there has been a 40% decrease in cash sales in the Texas/Oklahoma/New Mexico cattle region. Meanwhile, in the Iowa/Minnesota region, transactions in the cash market have dropped only 16% during the same time period.

The legislation will establish regional mandatory minimum thresholds of negotiated cash and negotiated grid trades based on each region’s 18-month average trade to enable price discovery in cattle marketing regions. In order to establish regionally sufficient levels of negotiated cash and negotiated grid trade, the secretary of agriculture, in consultation with the chief economist, would seek public comment on those levels, set the minimums and then implement them.

According to DTN, Senators also would increase penalties packers face in the beef and swine industries for violations under the Packers and Stockyards Act to the same level that a poultry dealer faces when USDA finds a violation.

Grassley had been pushing for each state to achieve 50% negotiated cash trade, while Fischer has pushed for a more regional approach that was struck in the deal. Still, Grassley told reporters that negotiated cash trade in a state such as Texas is down to just about 6% of the state’s fed cattle sales, and the bill would increase that level significantly.

Fischer, in a statement, said robust price discovery can help everyone in the supply chain, and the foundation of that comes down to negotiated cash sales. While cash sales are getting thinner in parts of the country, they are still the basis for marketing agreements between packers and feeders as well.

“One or two regions of the country should not have to shoulder the burden of price discovery, and that’s exactly what has been happening,” Fischer said. “Furthermore, even regions that primarily use alternative marketing arrangements (AMAs) such as formula contracts predominantly rely on negotiated cash sales to set their base prices. Our compromise proposal takes regional differences into account and ensures fairness for every segment of the supply chain.”

Grassley said the four sponsoring senators “have had very promising discussions” with Sen. Debbie Stabenow, D-Mich., chairwoman of the Senate Agriculture Committee, but that it remains to be seen how she and ranking member of the Senate Agriculture Committee will treat the legislation considering Congress has been unable to strike an agreement for a five-year reauthorization of the Livestock Mandatory Price Reporting Act (LMR).

The North American Meat Institute, which lobbies for meatpackers, stated that the bill ignores recent analysis of the beef and cattle markets and “the bill’s mandated government intervention will have unintended consequences that will hurt livestock producers and consumers.” NAMI has consistently maintained there is no need for new legislation to address the balance between packers and producers in the market, stating that “beef and cattle markets are dynamic,” and that “in a rush to do ‘something,’ this bill would replace the free market with government mandates, harm the livestock producers it is intended to protect, and essentially turn back time to the days of commodity cattle.

Groups representing cattle producers and members of Congress have been trying to strike a balance to stimulate more negotiated cash cattle trade, especially over the past two years, as the spread between live cattle prices and boxed beef prices reached record levels following multiple market disruptions such as the Tyson packing-plant fire in Kansas in 2019 and COVID-19 last year.

Ethan Lane, vice president of government affairs for the National Cattlemen’s Beef Association, stated that the group is still reviewing the language of the bill and comparing it to NCBA’s policy, though “It would appear that — as in previous versions — they can support much of this bill.

Lane added, though, that NCBA’s policy book also directs the group to oppose government mandates on cattle marketing methods and that they would be holding this bill up against the policy of the association.

Other national groups that have already announced their support of the senators’ bill include the American Farm Bureau Federation, the National Farmers Union and the U.S. Cattlemen’s Association.

County 10 Media reported that Fremont County, Wyoming’s newest USDA livestock processing plant, opened its doors on October 4th and they are ready to process cattle, bison, hogs, and lambs.

After around 7 years of planning and building, Genuine Meats will be Wyoming’s largest USDA facility once at full capacity, according to managing partner Beau Sheets.

They are also the only known local processor to have a custom harvest floor which was designed by a person who works closely with scientist Temple Grandin.

Their opening was a bit delayed due to supply chain issues, however, they are now up and running with plans to have the Genuine Meats label of items like snack sticks and summer sausage for sale around the first of the year.

Nebraska Cattlemen reported their appreciation for the support of Senator Fischer and Representative Bacon for advancing the much-needed Infrastructure Investment and Jobs Act – a bill providing investments into roads, bridges, and broadband infrastructure, in addition to securing much-needed regulatory certainty and relief for farmers, ranchers, and cattle transporters.

“Nebraska Cattlemen have worked closely with Senator Fischer and others to ensure the inclusion of the critical backend 150 air-mile exemption for livestock haulers under hours-of-service rules,” stressing the connection between the ability for cattle producers to efficiently raise cattle and haul them safely and to compete in a fast-paced global marketplace with the economic stability of rural communities and a resilient food supply chain.

Other key provisions of importance include funding for roads, bridges, ports, and waterways that are crucial to Nebraska farmers, ranchers, and ag exporters, additional funding for broadband internet infrastructure, and needed reforms to the federal permitting process for critical water-related investments.

The Infrastructure Investment and Jobs Act is not the same package as the multi-trillion-dollar budget reconciliation bill, rather a bi-partisan, hard infrastructure bill containing important provisions that support the beef cattle industry.


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How did we get here?

From the Holcomb Tyson fire to COVID-19;
Click to see a timeline of events that have brought to light the profit and pricing disparity in cattle markets.


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