June 8, 2022
“Why aren’t the consumers of America sitting here asking why they are being taken by these four big bullies? It’s far beyond what anyone can imagine. The packers are fabulously rich, and the consumers and producers are losing out,” says Leroy Forsberg, a cattle producer from Estherville, Iowa. “My son has gotten out of the business because he knows he can’t make money. My lots are empty because I can’t afford to keep losing money. There’s a big problem, and it needs to be fixed now.”
Cattle producers like Forsberg believe transparency in the cattle market is a key part of keeping independent cattle feeders in business. In May 2020, Sen. Chuck Grassley (R-Iowa) and six of his colleagues introduced legislation to require meatpackers to buy at least 50% of their weekly volume of beef slaughter on the cash market, with delivery to take place within 14 days. The legislation is designed to create an even playing field for independent beef producers who are selling their cattle on a cash market instead of through contacts. By November 2021, Grassley had gotten together with Sen. Deb Fischer (R-Neb.) to revise the legislation, and together they introduced the Cattle Price Discovery and Transparency Act — as two parts of legislation by the same party would be harder to pass.
“We now have nine Republicans and 10 Democrats co-sponsoring this bill, and we want to move ahead with this legislation,” Grassley says. “This has advanced more than ever before due to the extensive grassroots support of agriculture and cattle producers across the country.”
Current cattle marketing bill
The current bill has regionally negotiated bidding on cattle with a 14-day delivery and would establish a maximum penalty for covered packers of $90,000 for violations. The regionally approved pricing mechanisms are fed cattle purchases made through negotiated cash, negotiated grid, at the stockyard and through trading systems where multiple buyers and sellers can regularly make and accept bids. The idea is to ensure robust price discovery and transparency in pricing.
Iowa Reps. Randy Feenstra and Cindy Axne have introduced the bipartisan bill in the House of Representatives. Feenstra says, “This legislation desperately needs to be passed, since 85% of the country’s cattle are controlled by four packers. We must pass this to keep the smaller cattle producers in business. These are the people who are feeding our country, and we need to provide them with a fair market price for their cattle.”
Brad Kooima is a champion of cattle market reform. He has been a commodity broker for over 40 years and has been feeding cattle in northwest Iowa since 1974. Kooima pointed out how the American Farm Bureau Federation and National Cattlemen’s Beef Association think their organizations are making the laws which affect cattle producers, but they are not. The two organizations oppose the current bill because of regulations being placed in an area they haven’t been in the past.
“The ideas come from grassroots discussions across the state and country. These discussions are where the idea for the contract library and next-day weights came from,” Kooima says, referencing two ideas coming from producer meetings he was part of following the release of the legislation in 2020. “We need to stop the deterioration of negotiated trade in the cattle industry.”
Kooima went on to explain his role at the national level to help get more negotiated trade. NCBA called this price discovery reform the “75% plan,” where each region was to achieve at least 75% of the weekly negotiated trade volume to determine if robust price discovery was achieved in the specific region. Kooima says during this trial period, there was more negotiated trade than there had been previously. “Feedlots in the South were scared of how they could be affected. Some of the packers realized they had to participate. If all feedlots and packers in the South would do this, we wouldn’t have to have this bill.”
Feeders say the 14-day delivery is an important part of the cattle marketing bill. Forsberg argues it is completely necessary to help get their cattle to market at the optimal time.
“A year ago I sold cattle to a packer the first week of April, but they wouldn’t take delivery for four weeks, and the cattle were way past fat. I had a pen across the way that would be ready in May when they finally were to take delivery of the first group, but the packer buyer said he couldn’t buy those.
“The next words out of his mouth were, ‘I’ll offer you $5 over the June board if you will contract them.’ The June board was sitting $12 less than the bid I had on my other cattle,” Forsberg says. “And two days later, the June board tanked. It was all the way down to $115. Tell me these packers don’t know exactly what they are doing.”
Legislators want momentum to continue
Grassley and Feenstra both expressed their hope that their constituents could hear testimonies of more cattle feeders to realize how they are losing money on the cattle in their lots. Sen. Jon Tester (D-Mont.) introduced the Meat Packing Special Investigator Act to help monitor competition among meatpackers. While Grassley says the act shouldn’t have to happen, he says it is needed and a USDA special investigator would be set up dedicated to preventing and addressing anticompetitive practices in the meat and poultry industries and enforcing the nation’s antitrust laws.
Feenstra said this same bill in the House is out of the agricultural committee and is expected to gain momentum. “If we don’t help the smaller cattle producers, then we are going to lose them. Having a fair market for cattlemen across the country is so important. We can’t let the states who are pro-packer control the legislation and drive these producers out of business,” Feenstra adds.
Kooima says the prices contract growers are getting for their cattle starts with the Iowa cash bid.
“Iowa negotiates 60% of the fed cattle on a cash basis — the top state in the country doing so. Yet the packers in our area are bringing in contract cattle from other parts of the country to fill their kill capacity,” he explains. “What they are telling Northern cattlemen is so wrong that they are starting to believe it themselves. The formula guys are getting rewarded for quantity, not quality, and then our high-quality Iowa cattle are not getting rewarded.”
Grassley and Feenstra say they want to see a level playing field for cattle producers all across the country. “We have been told there will be a markup on the Grassley-Fischer bill sometime in June. Then we will be able to continue to move forward,” Grassley says.
Feenstra encourages producers to call legislators, especially Axne’s office, to let them know how important this bill is to the independent cattle producers. “Tell Axne we need to get this bill moving in the ag committee. Some grassroots pressure goes a long way,” he says.
To find your legislator and discuss cattle market reform, go to openstates.org/find_your_legislator.
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