Sen. Chuck Grassley, R-Iowa, has been working since 2002 to increase producers' leverage against meat processors, improve market price discovery and better situate independent cattlemen in the fed cattle markets. In his ongoing effort, he joined with other legislators to re-introduce his 50-14 proposal, which would require a minimum of 50% of a meat packer’s weekly volume of beef slaughter be purchased on the open or spot market and to slaughter those animals within 14 days.
Grassley joined to introduce the bill with Sen. Jon Tester, D-Mont., along with their colleagues, Sens. Joni Ernst, R-Iowa, John Hoeven, R-N.D., Tina Smith, D-Minn., Mike Rounds, R-S.D., Ron Wyden, D-Ore., Steve Daines, R-Mont., and Cory Booker, D-N.J.
The '50-14’ or spot market bill follows the introduction of the Cattle Market Transparency Act of 2021 by Sen. Deb Fischer, R-Neb. The two bills, while different, both focus on changes and enhancements to the cattle marketplace struggling to reconcile the conditions that were revealed following the Holcomb, Kan., fire at a Tyson’s facility; and the widely-reported closures of processing plants due to coronavirus outbreaks, which Grassley says continue to reveal a wide disparity between the cash-price of fed cattle and the price for boxed beef.
The bill would mandate negotiated cash trade at 50%. Without a mandated amount of cash trade, Grassley says producers will continue to be residual suppliers and will lack the leverage to fairly negotiate with packing companies.
Grassley says Fischer’s bill has some exciting provisions, such as the creation of a contract library and new required reports on the number of cattle scheduled for delivery which will add transparency and increase price discovery.
“However, when it comes to the negotiated amount of cash trade, Senator Fischer’s bill only mandates a regional minimum. This means price discovery would still be reliant upon cattle producers who already are negotiating,” Grassley says.
Price discovery is where a buyer and a seller agree on a price and a transaction occurs. Producers in the Midwest reporting regions already provide ample price discovery by putting in hard work and selling cattle using negotiated means at nearly 60%. However, other regions have much lower numbers of producers who trade on the cash market.
The 50-14 measure would simply shift the burden of price discovery from independent producers and spread it evenly among all cattle producers.
“This legislation better balances the distribution of responsibility across U.S. fed cattle inventories. To make informed decisions, buyers and sellers must have access to more reportable market data. With two bills on the table and a dialogue set to recommence, now is the time to work together to negotiate the best possible solution for the cattle industry,” says Matt Deppe, CEO of Iowa Cattlemen’s Association.
Government market intervention
“While the cattle industry has internally looked for ways to increase the amount of cash trade, it has not been able to find a solution. Unfortunately, this means government intervention is needed as it is past time for a solution,” Grassley said in a floor speech March 24.
The National Cattlemen’s Beef Association says Grassley’s bill is not the solution to bringing more price discovery and “misses the mark.”
“The industry – from leading livestock economists to NCBA state affiliates – agrees that any legislative solution to increased price discovery must account for the unique dynamics within each geographic region. As we have seen in other sectors, a one-size-fits-all government mandate rarely achieves the intended goal,” says NCBA Vice President of Government Affairs Ethan Lane.
NCBA supports a voluntary approach first to increased negotiated trade, Lane adds. “If a voluntary approach is unsuccessful, that same policy provides guidance toward a legislative solution that more closely resembles Senator Fischer’s Cattle Market Transparency Act.”
The United States Cattlemen’s Association welcomed the latest bill.
"As Congress looks to the reauthorization of the Livestock Mandatory Reporting Program prior to its expiration on September 30, 2021, USCA appreciates any and all efforts to reform the program. LMR must be better utilized as a mechanism for accurate and transparent reporting in order to advance price discovery and shore up the fundamentals of the CME cattle futures contracts,” USCA President Brooke Miller says.
With two bills reintroduced and the clock ticking on Livestock Mandatory Reporting reauthorization, the time to act is now, ICA adds.
“With two bills on the table and a dialogue set to recommence, now is the time to work together to negotiate the best possible solution for the cattle industry,” Deppe says.