Open Letter
Questions From The Brand About the 50-14 Legislation Fellow Beef Industry Stakeholders:
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o suggest U.S. beef producers are facing difficult times egregiously understates the extent of challenges thrust upon cattlemen during the past year. Yet, times like these often are the catalyst for ideas and innovations that bring meaningful improvements for a more sustainable future. While it has been a topic of keen discussion for decades, the call for change in fed-cattle marketing and price discovery rarely, if ever, has been louder than it is today. The idea of creating more robust price discovery and competition in the marketplace is easy to support and can create obvious shared benefits for stakeholders. Cattlemen widely agree that growth in beef demand means more dollars transferred back to the production sector. Yet, history proves it’s difficult to find agreement among cattlemen on how this is best accomplished. The debate around how producers share in the financial benefits of growing beef demand often focuses on the ratio of cattle sold in the negotiated spot (a.k.a. cash) market versus alternative marketing arrangements. To this point, Senator Chuck Grassley’s recently proposed 50-14 legislation centers on mandating an adjustment to an imbalance, requiring multiplant packers to purchase at least 50 percent of their cattle needs for each plant in the negotiated spot market. Owned by the American Angus Association and its Angus farmer and rancher members—whose opinions vary on the proposed 50-14 legislation—the Certified Angus Beef® brand exists to create demand for the high-quality beef sold under our label and therefore the Angus genetics and cattle that supply it. The brand is not a political or policy-driven organization but still very much vested
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Livestock Market Digest
in where the beef industry migrates on foreign-born cattle excluded from the profed-cattle marketing and how such mech- posed 50 percent spot market purchase anisms influence the flow of economic requirement and how do these excluded signals from consumers to producers. populations factor into the 50 percent spot While there are still obvious challenges market purchase calculation for a plant? in the beef industry, arguably, the busi❚❚ What will the impact be on valness is responding far better than ever ue-added programs such as age-and-source to the demands of the consumer, clearly verified, GAP-certified, NHTC, etc., and demonstrated by the significant growth of associated feeder calf prices, if a feeder’s high-quality beef demand since 2010. The ability to secure a fed-cattle market is not economic signals drove this improvement assured prior to placing the cattle on feed? and the emergence of grid premiums have We are confident there will be much been essential to recent gains in quality more discussion on this topic in the months and helped producers reap rewards for ahead. Independent of what is ultimately responding to those signals. decided in Congress and across the indusAnnually, cattlemen earn more than $92 try, our team at the Certified Angus Beef® million in Certified Angus Beef® brand grid brand will continue to focus on building premiums for cattle accepted for our brand consumer beef demand more than politalone. Based on what we understand today ical and policy matters outside our area about the 50-14 legislation, eliminating of expertise. Yet, we remain interested the Certified Angus Beef® grid premiums because the brand will be impacted, regardcurrently paid on a large portion of cattle less. We feel it better to ask questions now would muffle the consumer-driven signal for the sake of expanding perspectives for the industry has benefitted from and could our brand and the industry of which we limit a producer’s ability to maximize car- are a part. cass value and economic return. We appreciate the opportunity to share There are advantages and imperfec- our perspective and your consideration of tions to any fed-cattle marketing system. our questions. If you care to visit about Arguably, more negotiation could poten- this topic in more detail, please feel free to tially enhance cattle values as determined call or email using the contact information through grids given the influence on base provided below. price determination or premium/discount Thank you and take care. structure. That’s why the Certified Angus Sincerely, Beef® brand is not for or against any single John F. Stika marketing method over another. We simply President, Certified Angus Beef LLC want producers to have the incentive and opportunity to be paid what their cattle are Bruce Cobb worth, not having to take an average price Executive Vice President, Production, where the better cattle subsidize the rest. Certified Angus Beef LLC To that end, we have questions regarding specific language in the 50-14 legislaJohn Grimes tion. We have listed them below with the Chairman, Board of Directors, Certified goal of gaining a wider understanding of Angus Beef LLC the requested changes and potential outcomes. As a stakeholder engaged in this discussion, we hope you can help us do so or merely give these questions some additional thought as you engage the industry in this conversation.
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❚❚ How will negotiated grids be handled under the proposed requirements: considered part of the negotiated spot market given prices can be negotiated weekly without a written or implied contract with a packer or excluded from the spot market due to their grid structure? ❚❚ Why are dairy and dairy crossbred cattle, cattle over 30 months of age and
