Market price

Ranch Group in Congress: Introduce New Livestock Market Price Discovery and Transparency Law

BILLINGS, Mont. – On Friday, April 1, R-CALF USA distributed to congressional offices its review and recommendation for competition provisions under the new Livestock Market Price Discovery and Transparency Act of 2022 ( amended compromise bill).

The group identified several substantive concerns, including that the measure locks in place for at least two years, if not indefinitely, the very market structure that facilitated and encouraged the anti-competitive behavior alleged in R-CALF USA’s antitrust class action lawsuit against the four largest beef packers, as well as the conduct currently under investigation by the US Department of Justice.

Accordingly, R-CALF USA recommended that Congress introduce the amended compromise bill pending the completion of its trial and DOJ investigation to avoid what would constitute Congressional approval of the current proportion of purchases. in cash versus non-cash market purchases.

The group also pointed out that the regional structure of the amended compromise bill will likely ensure that captive supply arrangements, also known as alternative marketing arrangements (AMAs), will continue to predominate in the national livestock market. , even as new economic research raises concerns that a market dominated by AMAs may not ensure that cattle prices respond appropriately to supply and demand signals.

Other concerns include the provision that gives packers between seven and 30 days to comply with mandatory minimum purchase requirements. The group said this would allow packers to avoid the spot market for one, two or more weeks, depriving spot sellers of quick market access.

R-CALF USA also said that because the amended compromise bill contemplates different cash purchase requirements in each region, Congress likely views each region as an economically independent geographic area. However, research cited in the review shows this to be wrong as livestock are moved from one area to another. As a result, the group noted that cattle producers in one region could be denied quick market access if slaughterhouses in their region choose to buy all or most of their cash purchases from a neighboring region. .

The group also noted that despite Congress delegating authority to the United States Department of Agriculture to set mandatory minimum purchase requirements, Congress nevertheless prevents the USDA from setting such requirements above the level by 50%. The group suggested that this demonstrates congressional bias in favor of AMAs, as such a restriction could prevent the establishment of minimum cash purchase requirements at levels that research may show necessary to achieve a competitive market. such as a 60% level.

Referring to the amended compromise bill as a “woefully inadequate response to the grave chronic crisis in the U.S. beef industry,” R-CALF USA pointed out that not only will it take up to two years before mandatory minimum purchase is established; but also, Congress authorized the USDA to set initial purchase requirements at the same levels achieved on average in 2020 and 2021, a period in which USDA data shows the beef industry has lost an additional 1,000 small independent feedlots.

“The Amended Compromise Bill will do nothing to bring quick relief to the countless number of cattle farmers who are currently suffering, and have suffered for the past seven years, from a chronically dysfunctional market and perhaps from the most severe economic cost/price squeeze in history,” the group said.