Market price

Senators Introduce Fix for Livestock Market Price Discovery

Senator Chuck Grassley, R-Iowa, has worked since 2002 to increase producer influence over meat processors, improve market price discovery and better situate independent ranchers in feeder cattle markets. In its ongoing efforts, it has partnered with other lawmakers to reintroduce its 50-14 proposal, which would require that a minimum of 50% of a meat packer’s weekly beef slaughter volume be purchased on the market. free market or cash. and slaughter these animals within 14 days.

Grassley joined in bringing the bill forward with Senator Jon Tester, D-Mont., As well as their colleagues, Sens. Joni Ernst, R-Iowa, John Hoeven, RN.D., Tina Smith, D-Minn., Mike Rounds, RS.D., Ron Wyden, D-Ore., Steve Daines, R-Mont., And Cory Booker , DN.J.

The “50-14” or cash market bill follows the introduction of the Livestock Market Transparency Act of 2021 by Senator Deb Fischer, R-Neb. The two bills, while different, both focus on changes and improvements in the livestock market struggling to reconcile conditions revealed after the Holcomb, Kansas fire at a Tyson facility; and the widely reported processing plant closures due to coronavirus outbreaks, which Grassley says continue to reveal a big disparity between the cash price of fed cattle and the price of canned beef.

The bill would make 50% spot trading mandatory. Without a mandated amount of cash trades, Grassley says producers will continue to be residual suppliers and lack the leverage necessary to negotiate fairly with packaging companies.

Grassley says Fischer’s bill has some interesting provisions, such as creating a library of contracts and new reports required on the number of cattle scheduled for delivery, which will add transparency and increase discovery. prices.

Related: Congress seeks again to improve livestock market problems

“However, when it comes to the negotiated amount of cash transactions, Senator Fischer’s bill imposes only a regional minimum. This means that price discovery would still depend on the cattle producers who are already negotiating, ”Grassley said.

Price discovery is where a buyer and seller agree on a price and a transaction occurs. Producers in reporting regions in the Midwest are already providing broad price discovery by working hard and selling livestock using near 60% negotiated means. However, other regions have a much lower number of producers who trade in the cash market.

Measure 50-14 would simply shift the price discovery burden from independent producers and distribute it equally among all cattle producers.

“This legislation better balances the division of responsibilities among feeder cattle inventories in the United States. To make informed decisions, buyers and sellers need access to more reportable market data. With two bills on the table and a dialogue ready to resume, now is the time to work together to negotiate the best possible solution for the beef industry, ”said Matt Deppe, CEO of the Iowa Cattlemen’s Association.

Government intervention in the market

“Although the beef industry has looked internally for ways to increase the volume of spot trading, it has not been able to find a solution. Unfortunately, this means government intervention is necessary as it is high time to find a solution, ”Grassley said in a speech on March 24.

The National Cattlemen’s Beef Association says Grassley’s bill is not the answer to bringing more price discovery and “misses the mark.”

“The industry – from leading livestock economists to state affiliates of the NCBA – agrees that any legislative solution to uncovering a price increase must take into account the unique dynamics within each geographic region. As we have seen in other areas, a single government mandate rarely achieves the intended purpose, ”said NCBA Vice President of Government Affairs Ethan Lane.

The NCBA initially supports a voluntary approach to increase negotiated trade, adds Lane. “If a voluntary approach fails, this same policy provides guidance to a legislative solution that more closely resembles Senator Fischer’s Livestock Market Transparency Act. “

The United States Cattlemen’s Association welcomed the latest bill.

“As Congress considers re-authorizing the Mandatory Livestock Reporting program before it expires on September 30, 2021, the USCA appreciates all efforts to reform the program. The MRL must be better used as an accurate and transparent reporting mechanism to advance price discovery and consolidate the fundamentals of CME cattle futures, ”said Brooke Miller, President of USCA.

With two bills reintroduced and the countdown to re-authorizing mandatory livestock reporting, now is the time to act, adds the CIA.

“With two bills on the table and a dialogue ready to resume, now is the time to work together to negotiate the best possible solution for the beef industry,” said Deppe.

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