USCA: The USDA Releases Report on Historic Cattle Market Disruptions
(WASHINGTON) On July 22nd, the U.S. Department of Agriculture (USDA) released its highly anticipated report covering two market distorting events in the past year in the U.S. cattle industry – the fire at a Tyson Foods’ processing facility in Holcomb, Kansas in August 2019 and the ongoing food supply chain disruptions due to COVID-19.
United States Cattlemen’s Association (USCA) President Brooke Miller issued the following statement:
“The top-line considerations detailed in this report provide a roadmap for returning transparency and true price discovery in the cattle marketplace. USCA has long since advocated for making these changes through the reauthorization of Livestock Mandatory Reporting (LMR), a program which is due to expire on September 30, 2020.
“On July 1, USCA and twelve other organizations sent a letter to Senate Agriculture Committee Chairman Pat Roberts requesting a hearing be held on the state of the U.S. cattle industry. It is simply unacceptable to be met with silence, while producers are asked to weather another year of declining farm and ranch income. Producer organizations have brought forth real, tangible marketplace solutions that are underscored in this report, and that deserve to be brought forward for discussion on Capitol Hill.
“As noted in this report, USDA’s findings do not preclude the possibility that individual entities or groups of entities violated the Packers and Stockyards Act. That investigation is ongoing. We appreciate the work of USDA leadership and staff in thoroughly examining these historic market disruptions and look forward to the findings of the Department of Justice investigation for a complete overview of the allegations of anticompetitive and market distorting practices employed by the meatpacking industry.”
From the Report: Ten Considerations to Return Transparency and True Price Discovery to the Cattle Marketplace
1. As the number of participants has diminished, confidentiality guidelines have resulted in periods when prices cannot be reported in certain regions (e.g. Colorado), leading to concerns about price transparency. Reducing the instances of non-reporting regions through the restructuring of these regions is a change that could be made without legislative action, and that could ultimately expand the market data released to the public.
2. Given the long history of the accuracy of the daily slaughter estimates, USDA is exploring the idea of no longer referring to the daily report as an “estimate” to encourage the market’s immediate use of the information.
3. Borrowing from a practice used in the swine industry, AMS has also explored a 14-day slaughter scheduled delivery submission requirement through LMR. A 14-day cattle slaughter schedule exhibits two informative advantages over the current slaughter reports: (1) the data is available several hours earlier each day, and (2) scheduled delivery figures are provided for well beyond just the current slaughter day.
4. If an LMR region began to fail to meet confidentiality guidelines due to packers not procuring cattle on a negotiated cash basis, with the proper legislative authority, AMS could track and inform packers of the requirement to make an additional percentage of negotiated purchases in the following week to allow for reporting.
5. Beyond the scope of LMR, the concept of creating and compensating a pool of negotiated cash market traders has been explored by some in academia and industry. With further development and discussion, the idea may prove an innovative and flexible approach to solving the public good problem of a lack of reliable price discovery.
6. USDA, the Commodity Futures Trading Commission (CFTC), the Chicago Mercantile Exchange (CME), and relevant producer groups could partner to offer outreach and education opportunities and could also explore the alteration of existing futures contracts and the development of new contracts or derivatives specifically designed to level the playing field between large producers—who have greater access to information and capital— and small and medium-sized producers.
7. USDA’s Risk Management Agency (RMA) currently offers plans to protect against gross margin losses for fed cattle (Livestock Gross Margin) and price declines for feeder and fed cattle (Livestock Risk Protection). The Federal Crop Insurance Corporation Board of Directors (Board) recently approved changes for both of these products to make them more affordable and accessible to producers.
8. In January, USDA issued a proposed rule to establish criteria the Secretary would consider when determining whether an undue or unreasonable preference or advantage has occurred in violation of the Packers and Stockyards Act (P&S Act). USDA is currently reviewing the 2,351 comments received in response to the proposal as it works to finalize the rule.
9. There has been discussion of creating a beef contract library similar to the swine contract library USDA currently maintains pursuant to Section 222 of the P&S Act. Amending the P&S Act to develop a similar library for beef transactions could help increase price discovery in cattle markets and enhance access to market information for all market participants, regardless of size.
10. The ability to issue Civil Investigative Demands (“CIDs”) with respect to unfair or deceptive acts or practices would bring USDA’s authorities in line with those of the Federal Trade Commission (FTC) and DOJ. Amendments to elevate certain packer conduct to criminal violations and provide the Secretary with the tools necessary to carry out appropriate criminal investigations may also be ripe for consideration.
Established in March 2007, USCA is committed to enhancing and expanding the cattle industry’s voice on Capitol Hill. USCA has a full-time presence in Washington, giving cattle producers across the country a strong influence on policy development. For more information go to www.uscattlemen.org.
Brian Allmer & the BARN are members of the National Association of Farm Broadcasting (NAFB), the Colorado FFA Foundation, the Colorado 4H Foundation, the Colorado Farm Show Marketing Committee, 1867 Club Board Member, Denver Ag & Livestock Club Member, the Weld County Fair Board, the Briggsdale FFA Advisory Council, Briggsdale 4H Club Beef Leader & Founder / Coordinator of the Briggsdale Classic Open Jackpot Show.