Debate begins on the ‘Cattle Price Discovery and Transparency Act’

Jared Strong -- Iowa Capital Dispatch

Some federal lawmakers hope to boost the solvency of smaller cattle producers by giving them more information about current market prices, more options for selling their animals and increased federal oversight of the industry.

The U.S. Senate Committee on Agriculture, Nutrition and Forestry began its consideration of two bills on Tuesday meant to further those goals.

The Cattle Price Discovery and Transparency Act would require large meatpackers to divulge the terms of their so-called “alternative marketing arrangements” with cattle producers. The alternate arrangements often set a base price for the animals that is adjusted depending on their quality and weight and are touted as an industry efficiency that has helped boost the overall quality of beef. Those agreements have largely supplanted the cash-bid market that many smaller cattle producers utilize and have obscured the true market value of the cattle.

“We’ve got to have a cash market,” William Ruffin, a Mississippi cattle producer, told the Senate committee on Tuesday. “We’ve got to have the opportunity to sell our cattle.”

Ruffin said his options have dwindled over the years to the point that he now sells only to a single buyer. The bill aims to boost his options by requiring meatpackers to increase the number of cattle they buy on the cash market.

The second bill, the Meat and Poultry Special Investigator Act, would create a new U.S. Department of Agriculture office to monitor for anticompetitive actions in the industry.

The bills come in the wake of massive disruptions to the industry brought on by the coronavirus pandemic, which led to less income for livestock producers and higher prices for consumers.

“Our food supply chain, while efficient, also proved to be highly vulnerable,” said U.S. Sen. Debbie Stabenow, D-Michigan, the chairperson of the committee. “Consolidation and lack of competition was a significant contributing factor.”

Four companies — Cargill, JBS, National Beef and Tyson Foods — account for about 85% of cattle purchases in the country. They have been scrutinized lately for their increased profits while livestock producers struggle and consumers pay more. The companies’ chief executives are set to testify Wednesday at a congressional hearing to discuss the situation.

“The continual concentration of the marketplace into the hands of a few would eventually destabilize this country,” U.S. Sen. Jon Tester, D-Montana, a third-generation farmer, told the committee. “It will destabilize this country unless we take advantage of this moment in time. … We’ve got ranchers that are going broke. Ranchers that are generational that have been on the land three, four, five generations are going broke. Not because they’re bad operators. Not because they’ve made bad decisions. The model doesn’t work for them anymore, and we need to do something about that.”

The vast majority of the country’s feedlots have fewer than 1,000 cattle, according to the USDA, but they raise less than 20% of the country’s beef cattle. Feedlots with 32,000 or more cattle account for about 40%.

“In a nutshell, everybody is talking about competition,” U.S. Sen. Chuck Grassley, R-Iowa, a co-sponsor of both bills, said Tuesday. “We’re talking about bringing competition to an industry dominated by four packers and a cozy relationship with the big feedlots of four or five states, and they want to keep their chain moving. They don’t care whether there’s room for any independent producers or not. They, in turn, don’t care whether those cattle are owned by Wall Street bankers or farmers, and the independent cattle producers in the Midwest are being hurt.”

But Stephen Koontz, a professor of agricultural and resource economics at Colorado State University, questioned whether the proposed legislation would provide any relief for small cattle producers.

“There is no research to show that requiring more cash market transactions will boost prices for small producers,” he told the committee.

In January, the American Farm Bureau Federation said it opposes government mandates that meatpackers buy a certain percentage of their cattle with cash bids.

“We support the majority of this legislation, but we cannot support mandatory cash sales,” Zippy Duvall, the group’s president, said of the Cattle Price Discovery and Transparency Act.

There was general support among lawmakers on the committee to require meatpackers to reveal the terms of their alternative marketing agreements, or AMAs, in an effort to keep smaller cattle producers better informed about the market. Ruffin, the Mississippi farmer, lauded the provision.

“As they go into these AMAs more, I get less and less information about that. I don’t know what’s marketed when or where,” Ruffin said. “That information is guarded in the industry.”

There was concern that the additional federal regulation would lead to further price increases for consumers, and some lawmakers questioned the necessity of another USDA office to investigate anticompetitive behavior.

“Do we really think that creating yet another government entity is a real solution?” said U.S. Sen. John Boozman, R-Arkansas.

The committee is continuing to solicit more feedback on the bills before it takes action on them.