Senators Deb Fischer, R-Neb., Chuck Grassley, R-Iowa, Jon Tester, D-Mont., and Ron Wyden, D-Ore., released an updated version of their legislation, the Cattle Price Discovery and Transparency Act, that was first introduced in November 2021. The support for the bill is mixed, with the National Cattlemen’s Beef Association saying the authors “strayed from the wishes of the majority of cattle producers around the country.”
As detailed by supporter of the bill the Iowa Cattlemen's Association, in brief the Cattle Price Discovery and Transparency Act requires the nation’s largest beef packers to procure a percentage of their cattle via negotiated-type trade. This bill signals commitment from congressional leaders to cross the finish line with a solution that requires packers to increase competitive participation in the fed cattle market beyond alternative marketing arrangements. ICA has worked with Grassley's office in an attempt to fix what they view as shortfalls in the current marketing system.
Grassley says he pushed for hearings in the Senate’s Agriculture and Judiciary committees to shine a light on unfair market practices in the cattle sector and he’s continued working with a bipartisan group of senators to develop a solution. Grassley says the latest proposal comes after months of working with USDA staff to make technical changes that will allow them to best implement the bill.
“I frequently hear from Iowa’s independent cattle producers about their struggle to get a fair price for their cattle while the nation’s four largest packers operate with record profits,” Grassley says. “It takes several steps to improve cattle price transparency and will make much-needed market reforms to help independent producers in Iowa and across the country. This bipartisan bill is the best opportunity we have to make real reform in the cattle market this year, and I’ll continue to work with my colleagues to get this across the finish line,” says Grassley, a member of the Senate Agriculture Committee and ranking member of the Senate Judiciary Committee.
The updated bill would require the secretary of agriculture to establish five to seven regions encompassing the entire continental U.S. and then establish minimum levels of fed cattle purchases made through approved pricing mechanisms. Approved pricing mechanisms are fed cattle purchases made through negotiated cash, negotiated grid, at a stockyard, and through trading systems that multiple buyers and sellers regularly can make and accept bids. These pricing mechanisms will ensure robust price discovery and are transparent, the authors note.
The updated bill would also establish a maximum penalty for covered packers of $90,000 for mandatory minimum violations. Covered packers are defined as those packers that during the immediately preceding five years have slaughtered 5% or more of the number of fed cattle nationally.
The bill also includes provisions to create a publicly available library of marketing contracts, mandating box beef reporting to ensure transparency, 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. The contract library would be permanently authorized and specify key details about the contents that must be included in the library like the duration of the contract and provisions in the contract that may impact price such as schedules, premiums and discounts, and transportation arrangements.
Tester says, “Increasing price discovery will give producers more control and better information when they sell their livestock and is a key step in making markets more competitive. Montana ranchers raise the best beef in the world, and it’s about time they got a fair cut for their premium product.”
According to a one-page summary of the bill, it mandates that each regional mandatory minimum be not less than the average of that region’s negotiated trade for the two year period of 2020-2021. Additionally, it sets a maximum threshold for any region at 50%. It also requires USDA to conduct an initial review of mandatory minimums after two years. In addition, it allows USDA to work with the cattle and beef industry to periodically review and modify regional minimums after a public notice and comment period.
Cattle industry mixed
The cattle industry has been supportive of the cattle contract library concept, which a pilot program was included in the final appropriations bill for FY22 and overwhelmingly passed in the House last December. However, the mandated cash trade levels vary considerably by region and could have a different impact on producers in those different regions.
Ethan Lane, NCBA vice president of government affairs, says despite overwhelming feedback in opposition to a cash mandate, this latest version of the Fischer/Grassley bill “expands the concept to ensure that every single producer in the country selling fat cattle would be subject to a business-altering government edict.”
Lane adds, “This is an indication of just how far the sponsors of this bill have strayed from the wishes of the majority of cattle producers around the country. It is time for the sponsors to finally consider the perspectives of all those who this bill would impact, not just those in their own backyards – and we are ready to have that conversation whenever they are.”
The North American Meat Institute says the bill is now more onerous and more irrelevant as market driven prices for cattle producers have steadily risen to seven-year highs. “If this bill becomes law, there will be cattle producers who want alternative marketing arrangements (AMAs) but will instead be forced to sell on the cash-market, and the industry will turn back time to the days of commodity cattle, or worse, to government-controlled markets,” says Meat Institute President Julie Anna Potts.
Meanwhile, the U.S. Cattlemen’s Association President Brooke Miller says, zero percent negotiated trade is the end of the independent producer, and with it, a sovereign and secure food system. “We cannot allow corporate interests to steer a sinking ship; we need to immediately restore marketplace fundamentals and implement guardrails to prevent the industry from capsizing,” Miller adds.
USCA cites a study compiled by Texas A&M’s Agricultural and Food Policy Center that forecasted without the enactment of significant cattle market reform legislation, like the Cattle Price Discovery and Transparency Act, negotiated trade in Texas-Oklahoma-New Mexico is expected to fall to 0% by 2026.
USCA adds that economic analyses completed by the University of Arkansas and by Colorado State University's Stephen Koontz are based on a time when cash trade was occurring at around 60%. “Mr. Koontz himself states in his study that 'the research question is worth revisiting' due to the limited availability of relevant data,” Miller adds. “USCA is pleased that this legislation will provide additional economic analysis to define robust cash trade, based on current market conditions."
"Sen. Grassley works tirelessly to represent his constituent cattlemen in the face of adversity,” said Bob Noble, president of the Iowa Cattlemen’s Association. “We look forward to working with USDA and Iowa's congressional delegation to ensure the provisions are implemented in the most meaningful way possible.”