Billings, Mont. – Yesterday, in preparation for the U.S. Senate agriculture committee’s upcoming April 26, 2022, hearing on the Cattle Market Price Discovery and Transparency Act of 2022 (S.4030), R-CALF USA sent a comprehensive letter to the committee’s chair, ranking member and members urging rejection of the entire section of the bill that purports to reform the cattle market.
Calling the cattle market section an ineffectual reform to the abject market failure plaguing the U.S. fed cattle market since 2015, and further stating that the reforms decisively favor the status quo, the group states Congress is giving the U.S. Department of Agriculture carte blanche as to whether the packers will be required to change their current procurement practices and is giving the USDA two years to make its decision.
The group points out that the only market-impacting directives from Congress are that the already low volumes of cattle the beef packers purchased on average in the competitive cash market during 2020-2021 cannot be further lowered and the cash purchase requirement cannot be set above 50%. It then asserts these floor and ceiling directives run counter to the findings of two new economic studies, one fromGeorgetown University and the other from Iowa State University, that make it clear that the alternative marketing arrangements (AMAs) that predominate the market, combined with packer concentration, are causing cattle prices to be low and beef prices high.
These new studies, according to the group, should substantially alter Congress’ thinking regarding what market reforms are needed to restore competition to the cattle market. Just one of the study’s findings identified in the letter is that a one percent increase in the fraction of cattle purchased under AMAs is associated with a 5.9% reduction in the cash market price for cattle.
In its recommendation to Congress, the group suggests the cattle market reforms be substituted with the spot market protection bill (S.949), which the group stated was a better starting point for achieving more immediate and meaningful reforms.
In its conclusion, the ranch group explained why Congress must do more than what is contemplated in the Cattle Market Price Discovery and Transparency Act of 2022 to address the dire conditions faced by U.S. cattle producers. It stated, “The prolonged and chronically dysfunctional cattle market combined with persistent and widespread drought, and further worsened by record feed prices, will likely spell absolute disaster for the United States cattle industry as we know it today.