Beef industry wrestles over mandatory cash sales

The issue is expected to weigh on the minds of NCBA delegates this week in Houston.

Chris Torres, Editor, American Agriculturist

January 31, 2022

5 Min Read
A man that appears to be addressing attendees of an event
CASH SALE DEBATE: Colin Woodall, CEO of the National Cattlemen’s Beef Association, told attendees of the recent Lancaster Cattle Feeders Day that mandatory cash sales could lead to unintended consequences for cattle producers. Chris Torres

There are a lot of issues on the minds of beef producers these days. But one issue sparked a lot of conversation at the recent Lancaster Cattle Feeders Day: getting more cash sales in the marketplace.

Colin Woodall, CEO of the National Cattlemen’s Beef Association, says the organization has been focused on getting more cash sales in the marketplace, as well as better price discovery. The big question is whether cash trade should be mandated by the federal government.

NCBA delegates will be voting on that issue this week at the Cattle Industry Convention and NCBA Trade Show in Houston. Delegates to the American Farm Bureau Federation have already chimed in, voting against mandated cash sales at the January AFBF meeting in Atlanta.

Woodall says that he doesn’t expect NCBA delegates to be in favor of mandatory cash sales. But Congress and the White House will likely have the final say.

In a recent article written by Jacqui Fatka, Farm Progess policy editor, a recent bill introduced by Sens. Chuck Grassley, R-Iowa, and Sen. Deb Fischer, R-Neb., includes a sliding shift to more cash sales, which may limit the use of certain formula contracts in some regions.

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

Woodall says other bills in Congress would mandate 50% cash trade in the cattle market.

Encouraging more cash, or spot sales, in the marketplace is all part of the ongoing issue of trying to solve concerns that meat packers — mainly Tyson Foods, JBS, Cargill and National Beef — have wrestled too much control over the cattle marketplace over the years. It is estimated that the four major meat packers control more than 80% of beef processing in the U.S.

NCBA has supported a Department of Justice investigation of the meatpacking industry after accusations of unfair pricing and possible antitrust violations. JBS dropped its NCBA membership last summer, although the company has not formally stated that it left because of NCBA’s support of the investigation.

Woodall says the organization supports the establishment of an online portal that would allow producers to report complaints more easily to the Department of Justice.

But mandating cash sales, he says, could work against cattle producers and lead to unforeseen consequences.

"It's easy to look at those options and say, yeah, we're going to stick it to the packer,” Woodall says. “But let me tell you what the packer's reaction was. The packers were sitting back there whistling going, ‘C’mon boys, bring it.’ You know why? Because if you have a 50% mandate, they've got every excuse in the world to pay you even less.

“That's something that people weren't thinking about, but you have to think about it. Not to mention that we're talking about Congress and the federal government here. We can sit here, and we can craft the most ideal, perfect piece of legislation that exists. With the current government right now, it's time to think long and hard about mandates. Once the government gets in, it's awfully hard to get them out.”

More processors needed

Woodall says that expanding processor capacity and solving the industry’s labor issues would help to wrestle leverage away from the larger meat packers.

The height of the pandemic highlighted the long-standing issue of lack of local processing options for producers. Local demand for beef went through the roof, but there were not enough small USDA-certified plants to kill animals.

Sick workers forced large processing plants, including the JBS plant in Souderton, Pa., the largest beef processing plant east of Chicago, to close temporarily, only exacerbating the problem of getting local cattle to market.

Woodall says USDA has been working to get money in place to get more local, regional packing plants built. Labor, though, is still a big issue. “We have got to make sure we have guest worker programs that allow us to get the labor that we need to run these packing plants and all the steps in the beef supply chain,” he says.

In talking to packers, Woodall says that if all existing plants were fully staffed and operating at 95% capacity, at least 5,000 more head of cattle could be killed each day. He says that would bring more money into the system and benefit producers.

“That helps us pull cattle into the supply chain and allows us to get more money, bring that leverage back away from the packer and back on our side,” he says. “That’s what we’re trying to do. We’re trying to wrestle that leverage away.”

Livestock reporting authorization

Woodall says that he expects the Livestock Mandatory Reporting rule to be reauthorized for the remainder of 2022 in a temporary spending bill that will likely get passed in late February.

The Livestock Mandatory Reporting rule, established in 1999, mandates price reporting for cattle, boxed beef swine and lamb. It is reauthorized every five years. The current program expired in 2020, was extended to 2021 and was extended again through February.

Woodall says the organization has asked the USDA’s Agricultural Marketing Service to create a dashboard that would simplify reports for producers to go online and read.

"Mandatory price reporting is a great tool because it does gather a lot of data from the packers to provide to you,” he says. “But you kind of have to have a Ph.D. in mathematics to understand what all those sheets look like. We would like to get a dashboard constructed on the website that takes that data, puts into a graphical form and make it easier to understand.”

About the Author(s)

Chris Torres

Editor, American Agriculturist

Chris Torres, editor of American Agriculturist, previously worked at Lancaster Farming, where he started in 2006 as a staff writer and later became regional editor. Torres is a seven-time winner of the Keystone Press Awards, handed out by the Pennsylvania Press Association, and he is a Pennsylvania State University graduate.

Torres says he wants American Agriculturist to be farmers' "go-to product, continuing the legacy and high standard (former American Agriculturist editor) John Vogel has set." Torres succeeds Vogel, who retired after 47 years with Farm Progress and its related publications.

"The news business is a challenging job," Torres says. "It makes you think outside your small box, and you have to formulate what the reader wants to see from the overall product. It's rewarding to see a nice product in the end."

Torres' family is based in Lebanon County, Pa. His wife grew up on a small farm in Berks County, Pa., where they raised corn, soybeans, feeder cattle and more. Torres and his wife are parents to three young boys.

Subscribe to Our Newsletters
BEEF Magazine is the source for beef production, management and market news.

You May Also Like