Market price

NCBA Introduces Plan for Voluntary Market Discovery of Livestock Prices | 2020-10-18

Members of National Association of Beef Breeders published their proposal to improve the pricing process of the beef industry without requiring the participation of producers or packers.

The report was produced by a task force made up of NCBA members and staff and calls for a regional approach and a so-called “75% plan” with market participation and benchmarks “for the industry is striving to achieve it ”. This approach, NCBA President Marty Smith noted in a letter to industry stakeholders on Sunday, “would increase negotiated trade and encourage every major packer to participate in that negotiated trade.”

“Essentially, the subgroup will assess the weekly negotiated market information for each of the USDA Agricultural Marketing Service’s livestock feed reporting regions on a quarterly basis in arrears,” Smith notes. “Eventually, the subgroup will include in its assessment an analysis of packer participation data, but this information is not yet published under Livestock Mandatory Reporting.”

Smith also outlines several qualifications that each region will need to meet to avoid triggering price triggers:

  • Achieve no less than 75% of the weekly traded trade volume that current academic literature indicates as necessary for a “robust” price discovery in that specific region,
  • Reach this negotiated exchange threshold at least 75% of the reporting weeks during a quarter,
  • Achieve no less than 75% of weekly packer participation requirements, to be determined promptly and assigned to each specific region,
  • Meet this packer participation threshold for at least 75% of the reporting weeks in a quarter.

The NCBA is continuing this voluntary approach in an effort to avoid legislative or regulatory intervention, which has already been suggested by other cattle groups and several lawmakers. However, Smith notes – as previously reported by NCBA officials – that if the voluntary approach suggested by the NCBA failed to meet the price sought by the industry, the organization would be willing to consider legislative solutions.

Specifically, Smith notes that if any of the triggers listed above are triggered “in two out of four rolling quarters,” the NCBA subgroup will recommend that the organization “pursue a legislative or regulatory solution to force the discovery of robust prices ”.

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The formation of an NCBA subgroup and its corresponding report were in response to two events with major reverberations in the beef cattle industry: a fire at a Tyson facility in Holcomb, Kan., And the coronavirus pandemic. . Both events pushed down live cattle prices, but did not necessarily lead to a corresponding drop in canned beef prices.

Both of these events have led groups and lawmakers to reexamine the current framework for the beef industry, including a USDA investigation that has also produced legislative and regulatory options to address industry concerns. A corresponding investigation by the Ministry of Justice is underway.

“While it is certainly not a quick fix, I truly believe this approach provides the industry with a goal to strive for and, perhaps more importantly, a way forward if progress does not occur. are not demonstrated toward this goal, ”Smith said.

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