U.S. cattle markets continue to be plagued by a lack of transparency and fairness which continues to harm producers while rewarding large beef processors with record margins. The Spokesman visited with Iowa Farm Bureau Federation (IFBF) President Craig Hill to discuss these pressing cattle market issues and the steps that IFBF and the American Farm Bureau Federation (AFBF) are taking to address them. Here are excerpts of that conversation.
Q: Let’s start with some background: Although beef prices are higher at the grocery store now, why are farmers and ranchers so concerned about the transparency and fairness of today’s cattle markets. Aren’t they benefiting from these higher prices?
Cattle producers today find themselves in a very difficult position because of the lack of margins and extreme volatility in prices. That has been especially true after recent so-called “black swan” events in the market: the fire at the Tyson beef plant at Holcomb, Kansas, and the upheaval in the markets because of the pandemic. In both cases, packers’ profit margins widened to record levels of more than $1,000 per head as they were able to charge more to consumers for beef, while prices paid to farmers were stagnant or declined.
Those events and others have created a lack of trust and have forced farmers and ranchers to question the market’s fairness. Any industry that has a lack of trust in the supply chain has serious problems.
Another huge issue for cattle producers is the absence of price transparency. When you buy a home, a pickup or a piece of farm equipment, you can check on the internet or other places to see what similar products are selling for and if there might be a better deal out there. But when you sell cattle, all you know is what the packer has bid. Many times, that’s the only bid a farmer gets because the market is dominated by four big players and they often don’t bid against each other. And farmers are increasingly seeing packers demanding that farmers delay delivery of the cattle a week or more down the road, causing feed costs to rise, especially difficult during a period of higher corn and soybean prices.
Farmers, as price takers, need improved price discovery through visibility and price transparency, and they need more competition for their product. We see that in grains, hogs and other products, but it’s been lacking in cattle. That often leaves producers in the dark without the tools they need for price discovery.
We believe action is warranted on both the disparity of margins and the lack of market transparency.
Q. What steps is IFBF taking to address cattle farmers’ very serious concerns about the market?
Through our grassroots policy process, our county Farm Bureau delegates developed a wide range of policy recommendations designed to improve cattle markets.
Nearly all those recommendations were adopted by AFBF at its policy session in early 2021.
Those recommendations called for a larger share of negotiated sales in fed cattle markets with a focus on increased price transparency.
The national organization also adopted a recommendation from IFBF that any federal effort to increase the negotiated sales should be respectful of regional differences around the United States and should be regularly reviewed to make sure it is effective.
In addition, the AFBF delegates approved a recommendation to establish a group to study regional mandatory minimum cash cattle trade to help determine what levels are needed to achieve robust price discovery. That group is working now, with Delaware County Farm Bureau leader Randy Francois representing Iowa.
In addition, I made it a point to mention the concerns of cattle feeders to Agriculture Secretary Tom Vilsack when he visited Iowa earlier this spring.
Q: What actions are being taken by AFBF to address the cattle market issues?
Our national organization has also made the cattle market a priority, with a lot of input from Iowa and other leading cattle states.
AFBF met with other cattle groups and recommended that the U.S. Department of Agriculture (USDA) expedite its renewal of the Livestock Mandatory Reporting system. That renewal should include making formula base prices subject to the same reporting requirements as negotiated cash cattle sales, as well as the creation of a contract library.
AFBF and other groups also demanded that the Department of Justice issue a status report on its investigation on cattle pricing that was launched after the disruptions from the Kansas fire and the pandemic.
In addition, the national groups are working to encourage the investment in and the development of independent regional beef processors to improve the overall market for cattle.
Q: You mentioned the inquiry into the market by the Department of Justice and USDA. We heard a lot about it when the inquiry was launched, but not much since. Is that a concern?
The questions that sparked the inquiry need answers, and we’ve waited long enough. The fire at the Holcomb, Kansas, plant happened nearly two years ago. Everyone in the cattle industry has a right to know if there were violations by packers to rules of the Packers and Stockyard Act or if there are other actions that need to be addressed.
We also need to know the results of the federal investigation before Congress can consider any legislation to remedy the problems in the market. We. along with several lawmakers, including Iowa Sen. (Charles) Grassley, have been pressing to hold hearings and develop legislation to improve the cattle market. Lawmakers need the results of this report as a basis for those actions.
Q: Many farmers are looking into selling beef and other meats directly to consumers or working through local or regional processors. Do think these efforts could improve markets and help spur the needed changes in the cattle market to create more transparency and fairness?
It’s absolutely true we need more beef processing capacity now to help avoid the bottlenecks we’ve seen and create a better pricing environment for producers. If you had 200 companies in the beef processing business, instead of only a handful, problems like the Holcomb fire or the recent cybersecurity threat against JBS would pose less risk.
The smaller, more regional processors would help bring farmers closer to consumers and build the connection. That adds value to both farmers and the consumers, and it would help improve price discovery in the long run.