Legislators continue focus on cattle markets

Cattle producers have long witnessed the decline of negotiated fed cattle trade. New legislation – Optimizing the Cattle Market of 2021 – introduced in the House by Rep. Vicky Hartzler, R-Mo., and Rep. Emanual Cleaver, D-Mo., enables mechanisms for greater price discovery and transparency within the cattle market, while equipping producers with more tools and useful information to succeed. The action also comes on the heels of a bipartisan letter from House legislators and is the latest result of a recent groundswell of bipartisan, bicameral attention into the need to return market leverage to the side of cattle farmers and ranchers and address the startling price disparity between live cattle and boxed beef. If enacted, the bill would direct the USDA to create a cattle formula contracts library and increase the reporting window for "cattle committed" from seven to 14 days. These measures would increase transparency in the industry and improve the opportunity for robust price discovery. The bill seeks to address similar goals as S. 543 introduced by Senator Deb Fischer, R-Neb. While the use of formulas and grids help cattle producers manage risk and capture more value for their product, these methods depend upon the price discovery that occurs in the direct, buyer-seller interactions of negotiated transactions. The National Cattlemen’s Beef Association says current academic research has shown more negotiated trade is needed to achieve “robust” price discovery within the industry. Specifically, this legislation requires the secretary of agriculture, in consultation with the chief economist, to establish regionally sufficient levels of negotiated cash and negotiated grid trade within 2 years of enactment and to consider stakeholder input through a public comment period. Consideration must also be given to peer reviewed economic research from land grant universities. Packers include only federally inspected cattle processing plants that slaughter an average of 125,000 head of cattle per year (roughly 500 head per day) during the prior five years. These minimums may be weekly or another periodic basis, must account for black swan events, and must be reviewed every two years. After three years, a cost-benefit analysis must be done to determine the operation and effect of regional mandatory minimums...MORE