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Jun 22, 2022   |  

Progressive Farmer: Senate Ag Advances Cattle Markets Bill

By: Chris Clayton

OMAHA (DTN) -- After roughly two years of political wrangling, the U.S. Senate Agriculture Committee on Wednesday advanced a bill that would require major meatpackers to buy a certain percentage of their cattle through negotiated cash trade sales.

In a business meeting, senators spotlighted their support or opposition to the cattle markets bill, as well as a second bill that would create a special investigation office at USDA to watch over packers.

The main legislation, S. 4030, the Cattle Price Discovery and Transparency Act, would require USDA to establish minimum levels of negotiated cash trade for fed cattle by dividing up five to seven regions of the country. The cash trade volumes would depend on the number of packers in a region, availability of fed cattle, and the number of contractual arrangements -- alternative marketing agreements (AMAs) -- in each region. The mandate for cash trade would fall to packers that on average handle at least 5% of daily fed cattle slaughter.

Packers would also be required to report the number of cattle to be delivered for slaughter each day for the next 14 days.

The legislation was sparked by a string of incidents over the past three years that caused live cattle prices to fall while boxed beef prices soared. Those include a fire at a Tyson packing plant in 2019 and the COVID-19 pandemic that shut down packers temporarily in spring 2020.

The bill also would create a library at USDA of AMA contracts that would allow cattle producers to see the premiums others are receiving as well as mandate reporting of boxed beef prices.

The bill was led by Sens. Deb Fischer, R-Neb.; Chuck Grassley, R-Iowa; Jon Tester, D-Mont.; and Ron Wyden, D-Ore. Fischer's bill has 19 co-sponsors, including 12 members of the Senate Ag Committee.

Sen. John Boozman, R-Ark., ranking member of the committee, cited support for provisions to improve price reporting by packers and the establishment of a cattle contract library. But Boozman said he could not support the key provision of the bill that establishes regional mandatory minimums for negotiated cash trade. Boozman said it would roll back years of investment in the cattle industry to improve the quality of beef.

"If those investments are taken away, the focus becomes producing the most pounds for the lowest costs. Industry, ranch families and our rural communities all suffer," Boozman said.

After a voice vote advancing the bill out of committee, Boozman and Sen. Roger Marshall, R-Kan., wanted their opposition to it on the record.

Fischer, a Nebraska cattle producer, praised the bipartisan backing she got for the bill, particularly given she was the lead sponsor of a bill coming out of a committee led by Democrats.

"The goal of the legislation is to ensure every segment of the beef supply chain can succeed by ensuring robust price discovery and market transparency," Fischer said. "We know negotiated transactions involve a bid and an ask. They facilitate price discovery to establish the going rate for cattle. We also know that negotiated transactions have drastically declined over the past 20 years."

Fischer said she understands the value of AMAs, but those contracts rely on the cash trade to set base prices. She noted there have been voluntary efforts by cattle organizations to try to boost cash trade, but they have largely failed because packers did not participate. "Producer groups almost uniformly acknowledged concerns about cash price information becoming too thin."

Fischer also acknowledged Grassley, who has worked on similar cattle market legislation for two decades.

SPECIAL INVESTIGATOR

The committee also advanced another bill led by Tester and Grassley, S. 3870, the Meat and Poultry Special Investigator Act, which would create a new USDA office with subpoena power to investigate and prosecute violations of the Packers and Stockyards Act. The bill gives the office authority to bring civil actions against packers and poultry dealers. The office also would serve as a liaison to the Department of Justice and the Federal Trade Commission on competition issues in the food and agricultural sectors.

The House of Representatives last week passed a bill that included the special investigator provisions.

CASH TRADE NUMBERS

In previous hearings, producers supporting the cattle markets bill lamented they often cannot get bids for their cattle from packers. Countering those arguments were cattle feeders who have built their business through AMAs with specific packers.

Sen. Michael Bennet, D-Colo., noted Wednesday that cattle producers were divided in his state but largely oppose a mandate on negotiated cash trade because Colorado packers rarely if ever rely on negotiated sales.

"Colorado has all players within the cattle industry, and a mandate does not work well for them," he said. "But one thing we do agree on is that we've had too much consolidation in the meatpacking industry."

Marshall also said he is concerned about concentration in meat packing and foreign ownership. He said he supports most of the bill, but the mandate would "give the packer most of the leverage over who gets a good deal and who gets a bad deal. The smallest of our feedlot producers and cow-calf operations will lose under this arrangement."

According to USDA's national weekly cattle and beef summary, negotiated cash trade in the first quarter of 2022 was about 19.1% of all cattle slaughter nationally. Formula contracts were 62.4% of purchases, and the rest were forward contract or negotiated grid prices. Formula sales made up 81.6% of all sales in Texas, Oklahoma and New Mexico, 68.8% of sales in Kansas, and 60.8% in Nebraska.

In the five-area region, formula sales accounted for 66.5% of sales, and negotiated sales were 18.5%.

See "Cattle Markets and Price Discovery" here: .

AG GROUPS SPLIT

The cattle markets bill is opposed by the National Cattlemen's Beef Association (NCBA) and the American Farm Bureau Federation (AFBF), though state affiliates for both organizations are split on the legislation depending on their region of the country. Other organizations such as the U.S. Cattlemen's Association (USCA) and National Farmers Union (NFU) support the bill.

Not surprisingly, the North American Meat Institute, whose members are the meatpackers targeted by both pieces of legislation, criticized the bills as "heavy-handed government interference."

"The Grassley-Fischer bill being marked-up in the Senate Agriculture Committee this week will cost producers in the largest cattle producing region millions of dollars, and producers around the country will lose the ability to market their cattle as they choose," said Julie Anna Potts, president and CEO of NAMI.

COOL

Sen. John Thune, R-S.D., talked about producers and groups from his state on both sides of the legislation. He noted most producers and their associations support country-of-origin labeling (COOL). He noted nearly everything in the country is labeled for origin in the U.S. other than beef and pork.

"There probably isn't anything that matters more to producers around this country than being able to differentiate their product from other products that are imported from other places around the world," Thune said.

COOL was repealed in 2016 by Congress after Canada and Mexico challenged the U.S. in the World Trade Organization. Thune pointed to the U.S.-Mexico-Canada Agreement (USMCA) as a trade deal favorable to both Canada and Mexico but does not address labeling of meat products.

Thune wanted to submit an amendment but chose not to force a vote on COOL. Thune added this topic will be an issue in future farm bill debates.

"I've been asked by everybody not to offer this amendment today, but I'm just going to tell you the issue is not going away," Thune said.

Sen. Cory Booker, D-N.J., also criticized the "Product of USA" label that USDA uses now, pointing to the destruction of rainforest in Brazil for cattle producers that allows JBS to then bring beef into the U.S. and consumers then buy the beef without knowing whether it comes from cattle raised in the U.S. or overseas.

https://www.dtnpf.com/agriculture/web/ag/news/article/2022/06/22/legislation-require-minimum-levels

Office Contact Information

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