Last week’s report from the Department of Agriculture offered a laundry list of reasons for why beef markets behaved the way they did after two cataclysmic events hit the sector in as many years. But the 21-page document also contained something else: a legislative and regulatory to-do list for an industry well-known for infighting and disagreement.

Some of the suggested changes are regulatory tweaks that will be met with minimal opposition. Others would require legislation that will be difficult to craft, much less to move across an increasingly stalled Capitol Hill.

The report, which described the market reactions to an August 2019 fire at a Tyson packing plant in Holcomb, Kan., as well as to effects of the coronavirus pandemic earlier this year, stopped short of identifying any wrongdoing by the industry’s four major beef packers, but also said the “investigation into potential violations is ongoing.”

Both USDA and the Department of Justice are looking into the matter, sources tell Agri-Pulse, and further action could be taken depending on what is — or isn’t — announced at the conclusion of those investigations.

“Depending on what comes out of the USDA and Department of Justice investigations, if they find laws have been violated, if they’ve been violated to a dramatic degree, that lights a fire,” Rep. Frank Lucas, R-Okla., a cow-calf producer and former chair of the House Ag Committee, told Agri-Pulse.

Among the “other considerations” USDA points to in the report is a call for “price reporting and transparency” measures to be addressed, including some moves that would require congressional intervention. As USDA points out, an underlying concern about price discovery in the beef sector “is the declining number of participants in the negotiated cash market.” But efforts to expand the amount of trade happening in the cash market, rather than direct contracts that need not be reported to USDA’s Agricultural Marketing Service, have been unable to achieve industry consensus, the report notes.

Rep. Frank Lucas

Former House Ag Committee Chair Frank Lucas, R-Okla.

Sens. Chuck Grassley, R-Iowa, and Jon Tester, D-Mont., are among those that have floated legislative proposals to require packers to purchase a certain percentage of their cattle — 50% in the case of their legislation — on the open cash market, but the bill has not gained enough momentum to move in Congress. Following last week's publishing of USDA's report, U.S. Cattlemen's Association President Brooke Miller expressed frustration at the stalemate over that and other legislative proposals that would address the current state of the 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," Miller said. "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."

Reflecting other areas of farm policy where disagreement abounds, the breakdown on this issue is every bit as regional as it is partisan or based on the size of a given operation.

“If you look at a 50% mandate or a 30% mandate in an area like Texas, where they’re only selling 5% of their cattle on cash, that effectively would be just that; it would be telling a portion of producers in Texas that they no longer can market their cattle the way they’ve chosen, but instead must market them a different way,” Ethan Lane, vice president of government affairs for the National Cattlemen’s Beef Association, tells Agri-Pulse.

“I think people have looked at this through the lens of the packers having to buy a different way, but that means our producers have to sell a different way,” he added.

The report also mentions a 14-day delivery schedule submission requirement through mandatory reporting to USDA, another facet of some legislative proposals. That requirement is currently in place for the pork sector.

Some of the market tinkering could potentially move through Livestock Mandatory Reporting reauthorization due by the end of September, but that would also require the signoff of other protein sectors addressed in that program and could stand in the way of a so-called “clean” reauthorization. Asked whether that legislative vehicle was a possibility or if the reforms would have to wait until later, Lane said he has heard “both routes confidently stated” recently.

There’s also the matter of USDA offering the thought of providing the department with “investigative and enforcement tools on par with those of our federal partners.” That might include, USDA suggested, subpoena power, the ability to require written reports and answers to questions, as well as “amendments to elevate certain packer conduct to criminal violations and provide the Secretary with the tools necessary to carry out appropriate criminal investigations.”

In an industry typically skeptical of additional federal authority, that might be a tough sell. But Lucas suggested even some of his Republican colleagues might be open to the idea, since “so many farmers and ranchers, and so much of the feeding and processing industry, are in Republican districts.”

Aside from legislative changes to the marketing mix, Greg Ibach, USDA’s undersecretary for Marketing and Regulatory Programs, also told Agri-Pulse the department will begin working on risk management tools for producers. One such change — premium subsidies within the Livestock Gross Margin insurance plan — was announced last week, but other changes like smaller contracts on the Chicago Mercantile Exchange and greater producer education on use of the futures market could also alleviate some of the frustration in the beef sector without the requirement of congressional action.

Greg Ibach

Greg Ibach, USDA

“You’re going to see us implement some of the dialogue and discussions that fall with our USDA capability,” Ibach said in an interview. “We also look forward to working with the beef industry and Congress as they discuss or require any technical information about how we might implement any changes that they start discussing.”

There’s also the matter of bolstering small and medium-sized beef processing, something that has generated additional support after the closure of a handful of facilities due to coronavirus outbreaks temporarily crippled the supply chain in some parts of the country. Ibach suggested USDA’s Rural Development was exploring what its loan programs could do for such facilities, and a handful of legislative proposals on Capitol Hill are also trying to make it easier for state-inspected facilities to expand their distribution.

One such proposal was authored by Rep. Dusty Johnson, R-S.D. But much like many of the other issues addressed in the report, he said finding industry consensus will be key to moving anything through Congress.

“When we spend so much time fighting amongst ourselves, it’s hard to speak with one voice,” Johnson said. Add in the racial, economic, and coronavirus-fueled uncertainty currently taking place across the country, and “it is hard to get the attention of some of my urban colleagues around some of these supply chain and economic weaknesses in the cattle market,” he added.

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Where there does appear to be broad agreement is on the timeline: Something needs to happen, and it needs to happen quickly. Tester tells Agri-Pulse action is needed on the subject “sooner rather than later because you’ve got folks that are going to go broke here pretty shortly.” Asked if the issue could wait until negotiations for the next farm bill (the current legislation is authorized through 2023), Lane said, “I don’t know that anybody has the patience for that.”

Lucas, himself the veteran of several farm bills and the author of the 2014 House version of the legislation, said agriculture’s chief legislative vehicle is probably going to be too long of a wait.

“In the world we live in right now, that’s an eternity,” Lucas said. “I think these issues are important enough — again depending on what Justice and USDA find — these issues need to be addressed up front. Refined in 2023, but addressed up front.”

Ben Nuelle contributed to this report.

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