R-CALF USA - January 19, 2022
Billings, Mont. – In written testimony submitted for today’s hearing held by the U.S. House of Representatives Committee on the Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law: “Reviving Competition, Part 5: Addressing the Effects of Economic Concentration on America’s Food Supply,” R-CALF USA CEO Bill Bullard asked Congress to implement a stopgap measure to preserve what is left of the U.S. cattle industry.
Bullard explained the U.S. cattle industry is fast losing its critical competitive infrastructure – its participants, its feedlots, and its cow herd, which have all been reduced during the past few decades. He stated his group’s concern that Congress has not yet signaled its intent to make needed structural reforms to a market that has persistently returned noncompetitive prices to producers, prices that did not return the cost of production to U.S. cattle producers.
The “U.S. cattle industry suffers from systemic market failure, which though chronic for decades, has worsened considerably during the past seven years. And, yet, Congress has not enacted, and does not appear inclined to immediately enact, any meaningful structural reforms,” Bullard wrote.
The testimony explained that since 2015, beef packers had used their enhanced market power to purchase cattle at an average price of only 55% of the average weekly wholesale beef price and this has caused horrendous losses to both cattle feeders and cow/calf producers.
He wrote that if the marketplace in 2021 had required packers to pay the same percentage of the average wholesale price for cattle that the marketplace provided from 2007 through 2014, then the price of fed cattle in 2021 would have been $173 per cwt rather than the $123 per cwt that producers had actually received, which would have put an additional $650 per head into the pockets of producers for each head of fat cattle they sold.
By way of example, this was the form of an emergency stopgap measure that R-CALF USA asked Congress to consider pending enactment of meaningful market structure reforms that would reinstate competitive market forces in the U.S. cattle market.
“Tying cattle prices to a wholesale beef value index will not restore the competitive market forces that has been purged from the market due to severe structural deficiencies, but it would temporarily prevent the ongoing loss of equity that America’s cattle farmers and ranchers are experiencing each day the market remains dysfunctional. It would also temporarily remove the beef packers’ incentive to lower the price of cattle in the industry’s price discovery market – its negotiated cash market. Congress’ prolonged inaction in enacting meaningful structural reforms now necessitates an emergency stopgap measure such as this if America’s food security interest is to be preserved,” the testimony states.