US Senate Agriculture Committee Considers Two Controversial Livestock Market Proposals

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US Senate Agriculture Committee Considers Two Controversial Livestock Market Proposals

May 02, 2022

Commentary by Jim Wyckoff - TheCropSite

Bill S 4030, Livestock Price Discovery and Transparency Act of 2022, and S 3870, Meat and Poultry Special Investigators Act of 2022.

S 4030 would force beef packers to buy more of their cattle from “open and competitive markets.” Proponents believe that a lack of competition due to high concentration in the meatpacking industry gives slaughterhouses too much market power, to the detriment of both consumers and farmers and ranchers. The measure (S 4030) now has a total of 19 co-sponsors in the Senate, including nine Republicans and 10 Democrats. Legislation is directed by the senses. Chuck Grassley (R-Iowa), Deb Fischer (R-Neb.), Jon Tester (D-Mont.) and Ron Wyden (D-Ore.).

“Today’s market is more consolidated than it was in 1921, when this body passed the Packers and Stockyards Act. Rural America is drying up because we can’t get fair prices on the farm. Capitalism is not working, in this particular case, because of concentration and consolidation in the industry,” said Senator Tester.

Meatpackers currently acquire the majority of their cattle through contracts with individual producers. The Livestock Market Transparency Act would require greater public disclosure of what slaughterhouses are paying for their livestock and would also require slaughterhouses to buy more livestock in competitive spot markets.

Packers argue there is nothing inherently wrong with livestock markets, attributing price changes to natural forces of supply and demand and market disruptions like the pandemic.

In a statement, the North American Meat Institute urged members of the Senate Agriculture Committee to reject the Grassley-Fischer bill mandates and federal intrusion into beef and cattle markets. “Leading agricultural economists have determined that the latest version of the Grassley-Fischer bill remains costly for producers, especially producers in Texas, Oklahoma and Kansas, where the majority of American fed cattle are raised. “said Julie Anna Potts, President and CEO of the Meat Institute. “Due to a shrinking herd and continued consumer demand, cattle prices are at their highest level in seven years without federal intervention in the market.”

Economists from the Center for Agriculture and Food Policy at Texas A&M University have found that the latest Grassley-Fischer bill, S 4030, could cost producers even more than an earlier estimate of $112 million over five years (50 $ per head out of 2.3 million head). Economists found that the mandate would have regional disparities: the Texas-Oklahoma-New Mexico region, Kansas and Nebraska would bear most of the costs, while the Iowa-Minnesota region would come out relatively unscathed (see chart) .

In his testimony, Potts said, “…applying the spot market mandate to only the largest packers reveals the proposed mandate for what it is: a punitive tool. Under the latest version of the bill, if a slaughterhouse becomes too large, it will be forced to buy a certain percentage of cattle on the spot market. The illusion that the cash market is somehow more virtuous than other means of marketing livestock is gone; gone is the argument that the spot market is necessary for transparency and price discovery. Instead, the cash market mandate is just that: a government mandate designed to punish the biggest corporations and their suppliers. In this sense, the warrant is an antitrust tool that could be used in any industry. If a company gets too big, it will be punished with a government mandate stating how the company can purchase inputs. Such a government mandate should be opposed by anyone who wishes to protect the free market.

Ranking panel member Sen. John Boozman (R-Ark.), said under the proposed measure, the number of cattle marketed under alternative marketing agreements (AMAs) will decrease and the number of cattle sold on the cash market will increase. “For example, in Texas, Oklahoma and New Mexico, between 340,000 and 2.5 million fed cattle will need to come out of formula contracts each year. In Iowa and Minnesota, it’s less than two thousand heads a year.

Hearings also heard from Andy Green, USDA’s senior advisor for market competition, Bruce Summers, administrator of the agricultural marketing service, and a separate group of economists and agricultural producers. Green said: “In general, we intend to be as careful – input-driven, fact-driven – as possible and to consider all the different points of view of a complex and complicated industry. “

“Today’s competitive challenges in our livestock markets did not happen overnight; we have been there for a long time. These challenges have been brewing for decades and are not simply due to the 2019 Holcomb fire or the Covid-19 pandemic,” said Sen. Cindy Hyde-Smith (R-Miss.).

The panel of producers – Shelly Ziesch from North Dakota, William Ruffin from Mississippi and Shawn Tiffany from Kansas who is also president-elect of the Kansas Livestock Association – and Dr. Stephen Koontz from Colorado State University had clear divisions. Ziesch and Ruffin both support the legislation and Ruffin specifically said he has not seen prices drop as a cow/calf operator when more negotiated sales have taken place in the area he is in. . His oft-stated answer was that he lacked basic market information, leaving him unable to determine what the fair market value of his cattle is. Ziesch echoed that, saying that without more spot market information, she is unable to determine that fair value.

Tiffany, however, warned that he fears the premiums that are currently available to him and others who feed livestock through marketing agreements could disappear if more negotiated cash sales were to take place. He explained that the decisions he makes are made perhaps years before the cattle actually hit the market. Koontz also cautioned against provisions in the bill mandating cash sales by region. He too said that his research and the research he knows concluded that it would reduce livestock in general. He also pointed out that part of what is happening in the market is because the market is “unbalanced – too many cattle and not enough capacity”. He said this was a marked change from what had been seen for a long time when there was too much capacity and too few livestock.

Bottom line: There are still plenty of differences on this controversial measure, and it’s unclear whether supporters can muster enough votes to push it through the full Senate. In the meantime, it will be interesting to see if the Farm Bureau and/or NCBA releases a statement on the subject or issues updated recommendations on the topics in question. The hearing highlighted the differences that remain on this issue and why getting agreement on a single bill will be extremely difficult, also highlighted by the time it took to generate the package that eventually reached the point of having a hearing before the Senate Ag Committee.

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