A bipartisan group of four senators has an agreement that might serve as a vehicle to address long-standing issues of price discovery and transparency in the beef industry.
Sens. Deb Fischer, R-Neb., Chuck Grassley, R-Iowa, Jon Tester, D-Mont., and Ron Wyden, D-Ore., rolled out the framework for a new Cattle Price Discovery and Transparency Act Tuesday, saying they plan to formally introduce the bill “in the coming days.” The bill contains provisions of legislation introduced by the four previously with a formula tweak aimed at determining the percentage of cattle necessary for trading on the open market.
A joint release from the four offices contains four main actions the bill would take, but none will draw more attention than the requirements and details on mandatory minimum cash trade required in various regions throughout the country.
Producers currently sell their cattle primarily in two ways: through open cash bidding or through alternative marketing agreements made directly with packers. AMA terms are between the buyer and seller, which critics say leaves a lack of information about price discovery for others in the marketplace.
The legislation calls on the Department of Agriculture to create “regional mandatory minimum thresholds of negotiated cash and negotiated grid trades based on each region’s 18-month average trade.” But the bill doesn’t set those mandatory minimums, instead leaving that issue to USDA to “seek public comment on those levels, set the minimums, and then implement them.”
The legislation, however, does set some broad parameters: The minimums can’t be higher than three times a region’s lowest regional minimum or lower than the 18-month average at the time the bill is enacted. USDA would be able to “periodically modify regional minimums” after public notice and comment, according to a one-pager.
The new formula is a tweak from previous legislation Fischer introduced that offered the regionalization approach to cash trade minimums.
“One or two regions of the country should not have to shoulder the burden of price discovery and that’s exactly what has been happening,” she said in a statement. “Our compromise proposal takes regional differences into account and ensures fairness for every segment of the supply chain.”
Grassley and Tester previously introduced so-called “50-14” legislation that would have required 50% of a packer’s weekly volume of beef slaughter to be purchased on the cash market and taken for delivery with 14 days of purchase. Grassley said the new compromise bill “takes several steps to improve cattle price transparency and will improve market conditions for independent producers across the country.”
Tester echoed those thoughts, saying increased cash market activity “will give producers more control and better information when they sell their livestock, which is critical to helping them meet their bottom line.”
The bill has the backing of the American Farm Bureau Federation, National Farmers Union, and U.S. Cattlemen’s Association.
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The National Cattlemen’s Beef Association says “it would appear that — as in previous versions — we can support much of this bill.” However, the organization is currently working on a voluntary price discovery framework at the behest of its membership, which has called for a voluntary effort to be tried anew before backing a mandatory approach.
“We take the discussions and deliberations that go into our grassroots policy process seriously, and we will hold this bill — as we would any other — up against the policy of this association,” NCBA Vice President of Government Affairs Ethan Lane said in a statement to Agri-Pulse.
Aside from the minimum trade formula, the bill also contains language calling for USDA to determine how to preserve the confidentiality of packers as it develops the market requirements. There are also provisions calling for “more timely reporting of cattle carcass weights” and the 14-day delivery requirement as well as language requiring the creation of a contract library for the beef industry.
Rep. Dusty Johnson, R-S.D., and 17 House members introduced a bill in October to create a contract library similar to the structure already in place in the pork industry. The idea of a library has broad support within the beef industry and was among the requests from a gathering of producer groups earlier this year.
The bill’s legislative future could be bolstered by the consolidation of proposals in the Senate, but also might need full sector backing before some lawmakers would be willing to lend it their support. The industry’s primary focus is currently an effort to reauthorize Livestock Mandatory Reporting, which expires in December. NCBA has previously voiced concern about tacking anything onto LMR reauthorization that might slow the process.
The North American Meat Institute released a statement Tuesday criticizing the bill, saying it would force producers who prefer AMAs to sell into the cash market and return the industry "to the days of commodity cattle."
“Beef and cattle markets are dynamic. This fall prices cattle producers received for their livestock have risen without any government interference,” said Julie Anna Potts, NAMI's president and CEO. “In a rush to do ‘something,’ this bill would replace the free market with government mandates and harm those it is intended to protect: livestock producers.”
Story updated at 3:15 EST to include NAMI comment.
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