NATIONAL STAGE

REPORT ON VOLUNTARY PRICE DISCOVERY FRAMEWORK

LETTER FROM PRESIDENT JERRY BOHN TO NCBA MEMBERSHIP

Dear Fellow NCBA Member,

March 2021 marked one year since the declaration of a national emergency due to COVID-19. Nobody could have predicted then the serious impact the pandemic would have on our nation, the economy, or within the cattle markets. As states begin the process of fully reopening, I am hopeful that the worst of this crisis is behind us. Although the business environment for cattle producers has improved since March 2020, the volatility caused by the virus continues to impact our industry. To improve the business climate for cattle producers, further work is needed in the area of price discovery. Last October, you received a letter from Marty Smith announcing NCBA’s Voluntary Approach to Achieve Price Discovery in the Fed Cattle Market. This framework, sometimes called the “75% Plan,” was developed by NCBA’s Live Cattle Marketing Working Group Regional Triggers Subgroup as directed by the Fed Cattle Price Discovery policy (M 1.10) adopted at our 2020 Summer Business Meeting. As a reminder, the voluntary approach requires the subgroup to analyze the program’s performance at the end of every quarter. The subgroup has completed its evaluation of the first quarter of 2021, and I write today to report their findings to the members of NCBA.

After evaluating the weekly USDA-AMS negotiated trade data in the five major cattle feeding reporting regions, the subgroup has determined that a major trigger was tripped during the first quarter of 2021. According to our member-approved framework, if another major trigger is tripped during any of the remaining quarters this year, NCBA will pursue a legislative or regulatory solution to increase negotiated trade as determined by our membership.

Under the “Negotiated Trade” silo of the 75% Plan, one minor trigger is assigned to each of the regions. The subgroup evaluated the weekly negotiated trade volumes for each cattle feeding region, and determined that the IowaMinnesota and Nebraska-Colorado regions exceeded their thresholds under the 75% Plan during all of the reporting weeks – therefore, passing their negotiated trade threshold for this quarter. They also found that the Texas-OklahomaNew Mexico and Kansas regions each fell short of the threshold during five of the Q1 reporting weeks. One of those weeks occurred during Winter Storm Uri and another coincided with mandatory maintenance at a major packing plant which resulted in a lengthy closure. Both events disrupted normal cattle flows and brought critical packing capacity to a grinding halt.

The data from the weeks surrounding both events justified invoking the force majeure provisions of our framework, though a major trigger was still tripped due to a lack of packer participation. The subgroup will continue to explore ways to evaluate force majeure events in a more objective manner.

Let me be clear, our producers deserve high praise for their diligent efforts to implement the voluntary framework this past quarter. They offered cattle on a negotiated basis to comply with our framework, even when market signals were telling them to hold on to cattle in anticipation of higher prices. Often, these trades were made at a loss. We recognize the steps cattle producers have taken to address the need for greater price discovery and market transparency, and deeply appreciate their actions. Unfortunately, there was not enough participation in the negotiated market from some of the packers. Simply put, feeders can offer all their

cattle on a negotiated basis—but we only achieve our thresholds if there is a buyer willing to bid fairly on those cattle offered.

While the 75% Plan framework calls for the evaluation of a “Packer Participation” silo (in addition to the “Negotiated Trade” silo), this piece of the program is not yet complete, and thus was not evaluated during this quarter. NCBA continues to finalize the details with the four major meatpackers. While we are in the final stages of these negotiations, the basic mechanics have already been established by the subgroup—and we know that, had this silo been evaluated during the first quarter, we would have tripped a major trigger with the packer silo as well.

This quarter, the market fell short of the negotiated trade volumes outlined in our voluntary framework, but that should not overshadow the significant improvements made to price discovery since the framework’s implementation. For example, negotiated trade activity is already up significantly year-over-year in the TexasOklahoma-New Mexico region.

It is apparent that the work of NCBA, and the efforts of the producers who have participated in this framework, have been critical in this increase. These gains were made despite residual COVID-19 disruptions, packing plant closures, natural disasters and a volatile market. Cattlemen and women should be commended for their efforts to bring more price discovery to the marketplace. But we still have a ways to go.

We remain committed to working with all levels of the supply chain to ensure more fed cattle are offered and procured on a negotiated basis. Please do not hesitate to reach out to your NCBA officer team or our staff in Washington, D.C., with any questions or concerns.

Sincerely,

Jerry Bohn President, National Cattlemen’s Beef Association

DETAILS AT CALCATTLEMEN.ORG/EVENTS

On May 10, member leaders of American Farm Bureau Federation, National Cattlemen’s Beef Association, National Farmers Union, R-CALF USA and the United States Cattlemen’s Association met in Phoenix, Ariz..

These groups convened at the request of Livestock Marketing Association to discuss challenges involved in the marketing of finished cattle with the ultimate goal of bringing about a more financially sustainable situation for cattle feeders and cow-calf producers.

The group talked openly and candidly about a wide range of important issues facing our industry today, including but not limited to:

• Packer concentration, • Price transparency and discovery, • Packer oversight, • Packers and Stockyards Act enforcement, • Level of captive supply, and • Packer capacity.

The group also agreed to take to their respective

organizations for consideration these action items: • Expedite the renewal of USDA’s Livestock Mandatory Reporting (LMR), including formula base prices subject to the same reporting requirements as negotiated cash and the creation of a contract library. • Demand the Department of Justice (DOJ) issue a public investigation status report and as warranted, conduct joint DOJ and USDA oversight of packer activity moving forward. • Encourage investment in, and development of, new independent, local and regional packers. This unprecedented meeting brought together diverse producer organizations to identify issues and discuss potential solutions. These issues and action item lists are not comprehensive, due to time constraints of this meeting. Attending organization representatives were pleased to have reached consensus on many issues and are committed to the ultimate goal of achieving a fair and transparent finished cattle marketing system. NCBA and PLC Pleased To See Ranchers and Farmers’ Input Adopted In 30x30 Guidelines

On May 6, the National Cattlemen’s Beef Association (NCBA) and Public Lands Council (PLC) recognized the inclusion of agricultural producers’ recommendations in the Biden administration’s conservation goals report. The report details the administration’s approach to conserving 30 percent of the nation’s land and waters by the year 2030 — an initiative previously called 30x30 and now dubbed “America the Beautiful.” The report lays out a 10-year roadmap for conservation that includes many of the priorities that are most important to cattle and sheep producers, including the protection of private property rights, learning from successful working lands management and leveraging the expertise of ag producers for the benefit of lands, wildlife and all land users.

“We are pleased to see USDA and DOI incorporate many of the recommendations of America’s farmers and ranchers into this conservation plan. This is a productive starting point that builds on the input of a diverse array of stakeholders — and moving forward, our focus will be on holding the administration and federal agencies to it,” said Kaitlynn Glover, NCBA Executive Director of Natural Resources and PLC Executive Director. “Over the next decade, livestock producers will continue doing what they’ve done for generations — manage their lands in a way that promotes conservation and good environmental outcomes, and share that expertise with federal agencies.”

“If you want to see successful examples of protecting open spaces, improving the health and resiliency of public lands and balancing durable conservation with multiple use, look no further than American cattle and sheep producers,” added Glover. “We look forward to continuing our dialogue with the administration to make sure that the agencies implementing 30x30 leverage the expertise of our producers and reward them for their good work on the ground.”

One of the report’s six initial recommendations for the “America the Beautiful” initiative focuses specifically on 20 California Cattleman June 2021 agricultural producers. NCBA and PLC have been in constant and proactive communication with the administration to make sure the White House understands the vital role ag producers play in safeguarding our natural landscapes. The report includes recommendations to: • Incentivize voluntary conservation efforts and provide new sources of income for American farmers, ranchers and foresters • Improve the effectiveness of relevant USDA conservation programs through the 2023 Farm Bill • Support the voluntary conservation efforts of private landowners • Leverage public-private partnerships and voluntary measures to improve targeted populations of wildlife • Create jobs in rural America that support science-driven stewardship and conservation efforts.

NCBA and PLC have long advocated for conservation policy that is based on science and fact, not emotion or political rhetoric. Livestock producers have an excellent story to tell on conservation, climate and environmental issues: • Direct emissions from cattle account for only two percent of the United States’ overall greenhouse gas emissions. • Livestock grazing significantly improves soil health, increasing the capacity of grasslands to sequester carbon out of the atmosphere. • The U.S. cattle and beef industry has had the lowest greenhouse gas emissions intensity in the world since 1996. • Between 1961 and 2018, the U.S. beef industry reduced emissions by more than 40 percent through continued sustainability efforts and improved resource use. • Last year, corn going to feed beef cattle represented only 7 percent of all the harvested corn grain in the United

States.