Fairness in The Cattle Market
May 11, 2022
As Nebraskans know well, we are the beef state. We have every segment of the supply chain from cow-calf producers, to backgrounders, to large and small feed yards and also three of the four big packers in the state. The livestock industry contributes $13.8 billion to Nebraska’s economy annually. It is without a doubt the economic engine of our state.
Recently, there was a legislative hearing on my bipartisan bill The Cattle Price Discovery and Transparency Act in the Senate Agriculture Committee. I first introduced legislation nearly two years ago after hearing concerns from cattle producers not only in Nebraska, but across the nation. My goal since I began working on this issue has remained unchanged: to ensure robust price discovery and market transparency.
Negotiated transactions involve a bid and an ask. They are the building blocks of price discovery to establish the going rate for cattle. Over the past 20 years, however, the number of negotiated transactions have drastically declined and that decline has been especially pronounced in some regions of the country.
With this decline in negotiated transactions has come an increase in the number of Alternative Marketing Agreements (AMAs). While these agreements can provide economic returns and operational efficiencies, they ultimately rely on the negotiated market and often use publicly reported cash price information to set their base price.
No matter who you talk to, there is widespread concern throughout the cattle industry that the cash market is becoming too thin. While there have been some efforts to voluntarily increase negotiated trade, ultimately these efforts failed because the packers failed to participate.
Additionally, producers’ share of the beef dollar has continued to decline while the packers’ share went up 31% last year. A recent article in the Omaha World-Herald stated: “Over the last four years, the price of beef is up $1.34 per pound. But farmers have received less than 2 cents of that increase, with the packers netting $1 of it. The rest went to retailers.”
Working in a bipartisan fashion with my Senate colleagues from all around the country, I have a come up with a solution to address these issues in the cattle market. Our bill would establish minimum levels of fed cattle purchases made through negotiated transactions that contribute to price discovery and imposes a maximum penalty for covered packers of $90,000 for violations. It makes several other reforms to increase transparency in the marketing. These reforms include creating a marketing contract library, mandating box beef reporting, expediting the reporting of cattle carcass weights, and requiring a packer to report the number of cattle scheduled to be delivered for slaughter each day for the next 14 days.
There was a fulsome examination of our bill at the hearing. It was a good conversation and it was productive. Members of the committee had the opportunity to share where they stand on the bill. Importantly, we also heard from a cattle producer in the South that increased negotiated trade in his region has not impacted his bottom line, as many economists have claimed.
Some of the witnesses claimed, “The seller is in the driver’s seat.” That statement is just plain out of touch from reality. If cattle producers were in the driver’s seat, they would set a price and the packer would take it. Instead, producers take the price that is offered by the buyer. Declining negotiated trade has left many producers to face a take it or leave it market – that is the reality.
Our bill has 19 Senate cosponsors (9 Republicans, 10 Democrats) from geographically diverse areas of the country, including half of the Senate Agriculture Committee, and strong support from family ranchers and cattle producers. I’m committed to moving this bill forward and I am hopeful we will have a markup on the bill soon.