AgWeek: Cattle market continues search for a market fix
By: Michelle Rook
Cattle producers have significantly struggled over the last few years, and industry leaders continue to look for a solution to what they call a broken market.
The cattle industry continues to struggle to find a solution to what they call a broken market due to anti-competitive practices and market manipulation by the meat packing industry.
Cattle producers have significantly struggled over the last few years. In 2019, a fire at the Tyson beef plant in Holcomb, Kan., created significant market disruptions. In 2020, COVID-19 related plant closures led to additional supply chain disruptions and processing capacity shortfalls across the country. Department of Justice investigations into both incidents have not produced any results. Meanwhile, the industry is again facing a major disconnect between the record profits meat packers are making as a result of high boxed beef prices and the losses cattle producers are facing in the country with low cash prices. It appears plant labor shortfalls remain an issue.
"Unfortunately, I don't believe we are. It seems like zero progress has been made on the federal level. I'm getting so frustrated at this time. We've got to start fixing the issue. We just aren't addressing it." Korth says, "The packer margin is way too high again. We thought it was bad a year ago in the middle of COVID, and now it's even worse."
Zane Williams is also fed up.
"I'm so frustrated with the packer making $900 to $1000 and we can't squeeze $50 out of these fat cattle. I feel it's almost a legal robbery," said the small farmer feeder from Irene, S.D.
Williams said as an independent small farmer feeder he has no leverage against the packer, and he said that has been made worse with the high price of corn.
"As long as we keep taking them cattle every day, trailer load after trailer load, they don't have to bid up," he said.
The cattle industry is renewing its push for answers and reform as cattle producers, especially smaller feeders, are experiencing conditions that are threatening their ability to stay in the business. On Monday, May 17, the Iowa Cattlemen's Association sent a letter to Attorney General Merrick Garland and Secretary of Agriculture Tom Vilsack calling for concurrent investigations of market manipulation by the packing industry.
This follows a meeting ICA had in Monticello, Iowa, with Sen. Chuck Grassley, R-Iowa, to discuss a fix for the problem. As a result, Grassley and fellow senators, including Sen. Jon Tester, D-Mont., have reintroduced the 50/14 bill to mandate packers buy a minimum of 50% of their weekly cattle slaughter volume on a negotiated basis.
Grassley and his colleagues say the corporate meat packers have ripped off cattle ranchers too long by unfairly driving down prices for their livestock. The bill is designed to provide more transparency and enhance price discovery to the market, especially as consolidation continues to rise.
"The lack of transparency in cattle pricing isn't a new problem," Grassley said. "Unfortunately, the COVID-19 pandemic has only highlighted the need for additional price transparency measures to ensure producers are getting a fair price for the hard work of raising cattle."
The senator also reintroduced the bill after hearing from constituents that there is a discrepancy between high grocery store shelf prices and simultaneous decreased cattle prices.
ICA supports the reintroduction of the 50/14 bill. CEO Matt Deppe said their producer members have continually expressed that all participants in the fed cattle market share responsibility in providing price discovery and transparency. He said the 50/14 legislation better balances that distribution across U.S. fed cattle inventories.
Sen. Deb Fischer, R-Neb., also has introduced similar legislation to mandate more negotiated cash cattle purchases by the meat packers. However, instead of mandating a national minimum, it sets a threshold for robust price discovery in each cattle feeding region of the country. Northern feeding areas like Iowa and Nebraska have much higher percentages of cash sold on the spot market than feeding areas in the south. Fischer's legislation would recognize that. Grassley and Fischer are currently working together to try to find a compromise on their legislation and also want to ask for a hearing in the Senate Ag Committee to shed light on the issue.
Cattle feeders in general aren't sure if more legislation is the answer because the current laws on the books that are included in the Packers and Stockyards Act aren't even being enforced. And while Korth is not for regulation, he said the market does need price transparency, and he thinks more negotiated cash cattle would be beneficial.
"I think that would help. You know price discovery and negotiated trade would help the situation, and I don't know how you regulate packer margins," he said.
On May 17, several farm state lawmakers also asked Garland to continue the investigation into the nation's four biggest meat packers. In a letter to the attorney general, the members of Congress wrote about the importance of fair and transparent markets for farmers. The group also requested DOJ provide Congress with updates on its investigation and encouraged ongoing vigilance on the issue.
An unprecedented meeting also was held in Phoenix, Ariz., on May 10 to unite the industry and discuss the challenges in marketing finished cattle. The goal was to provide a more financially sustainable situation for producers. Member leaders of the American Farm Bureau Federation, National Cattlemen's Beef Association, National Farmers Union, R-CALF USA, and the United States Cattlemen's Association convened at the request of the Livestock Marketing Association. The group talked about important issues facing the industry including packer concentration, price transparency and discovery, packer oversight, Packers and Stockyards Act enforcement, the level of captive supply and packer capacity.
The group also agreed to deliver to their respective organizations action items for consideration. Those included, again, an investigation of packer activity, expediting the renewal of USDA's Livestock Mandatory Price Reporting with the inclusion of formula base prices subject to the same reporting requirements as negotiated cash, the creation of a contract library, and development of independent, local and regional packers.