With the U.S. Department of Agriculture’s recent cattle market policy recommendations, House Agriculture Committee Chairman Collin C. Peterson (D., Minn.) and Ranking Member K. Michael Conaway (R., Texas) sent a letter to U.S. Department of Agriculture Secretary Sonny Perdue, urging him to work with university policy research centers to analyze issues related to the cattle industry, especially in light of the recent and ongoing stress related to COVID-19.
The U.S. beef sector has experienced unprecedented stress due to the pandemic, as well as from a plant fire in August 2019. While speaking on the Senate floor last week, Sen. Chuck Grassley (R., Iowa) shared that the spread between fed cattle prices – what the producer gets paid – and the boxed beef values – what the company gets paid averaged $21 per hundredweight from 2016 to 2018.
However, during April and May of this year, the packer profit margin topped out at a spread of $279 per hundredweight.
Grassley shared that on July 22 the USDA issued a significant report that lays out a roadmap to fix the cattle marketplace. USDA mentions 12 ways to create additional price discovery, increase marketplace competition, and have a more transparent relationship between the price for live cattle and beef products.
“This investigation and report is a breath of fresh air,” Grassley said.
Grassley said USDA’s report is seen as an endorsement for his proposed bill with Sen. Jon Tester (D., Mont.) and their 50-14 concept to require half of packer’s weekly volume of beef slaughter to come as a result of purchases made on the cash market.
“Besides the Grassley-Tester bill, Congress has a responsibility to fully vet the 11 other considerations that the Trump Administration lays out in its report,” Grassley said on the floor.
“The Agriculture Committee should hold a hearing on this roadmap. We should bring a diverse set of stakeholders from government officials, business executives, and subject matter experts to explain the challenges that cattle producers are facing,” Grassley said. “A hearing would allow the committee to properly vet proposals to improve mandatory price reporting, which needs reauthorized by September 30 of this year.”
In a letter on the House side, Peterson and Conaway call on USDA’s Office of the Chief Economist to evaluate cattle market structure, price discovery, price reporting, purchasing mandates, and barriers to entry in the packing sector.
The letter also specifically asks for the analysis to address the following questions:
- How did the sector get to its current structure and what are its advantages and disadvantages for producers as well as consumers?
- Is the current capacity sufficient for the industry to thrive and grow?
- What are the impediments to expansion for both new and existing firms of varied sizes?
- Are there policy options to expand capacity or increase price discovery regionally or nationally, and would those options address current concentration and supply chain vulnerability concerns?
- What common success factors for small to medium packing plants, including producer-owned processing can be documented, and is there a set of generalizable strategies for success?