The Worst of Times... and the Best of Times BY CAROL WILSON

The Worst of without ever competing with other packers to buy cattle on a cash market. Packers and Times ... and The Best of Times feeders both love this arrangement. But it is hell for the small producer who feeds cattle and for whom a good price for by Carol Wilson finished cattle might mean the difference between him staying in business or not. “Think

Lof the difference it would make if the packers ook around. We think because we are needed a few hundred finished cattle to make all a part of the cattle industry, we have their quota each week and had to get out and similar goals and values. But we don’t. bid on a competitive market to get them,” Wall We aren’t even all in the same boat. Cattleman’s boats are taking on water and sinking. Feedlot boats are secure on the water with full lots and cattle hedged. Packer boats are in the harbor, getting rich with beef flying off the shelves at the highest prices in recorded history. And they aren’t sending lifelines back to producers. Though we’ve been in different boats for years, the 2019 fire in a packing plant in Kansas and the 2020 COVID-19 pandemic stated. “It is all about trying to preserve as many players in the industry as possible,” Wall noted. “We want to keep small communities alive, keep the rancher able to pay taxes and keep their land investment. We want to save the industry and we realize we are vulnerable. If the packers had to get cattle on a cash market each week, get competitive with bids, it would really help.” put a spotlight on the glaring differences: the Kansas fire took 6,500 head a day out of production and revealed that we had a broken cog in the wheel, making cattlemen very “ Is there a rancher who is not concerned when the price of vulnerable. The pandemic was graphic, as we boxed beef that packers sell to saw empty meat shelves in stores while we had pens full of fed cattle that no packer was retailers goes up 100% while bidding on. During the pandemic, Industry cattle prices go down experts estimate packers were making $600 to $2,500 per head while ranchers were 30 percent?” losing as much as $400 on each animal they produced. Those who care about the history, tradition and future of the livestock industry have been sickened by the carnage wrought by the beef industry upon the cattle industry, and are The cash market is important for more than just one transaction. Cattle futures are based on the cash price, and the feeder and yearling markets are both based on and dependent on the cash price of finished cattle. acting to save the cowboy, the small livestock A PUSH FOR POLICY producer, the backgrounder and the sale barn, Midwestern cattlemen tried to resolve conthe order buyer and the feed salesman, and cerns and lead the industry to more robust work for a future in the livestock industry. price discovery at the National Cattlemen’s

Corbitt Wall of DV Auction is the articuBeef Association’s Live Cattle Marketing late spokesperson for like-minded cattlemen, Committee at the end of July. After considmany from the Midwest, who have spearheadering several proposals aimed at encouraging ed the push for market transparency and cash greater volumes of cash cattle trade, the values. Using his popular Feeder Flash, a daily minimum cash policy that had been originally market video which garners approximately presented was so watered down that nothing 10,000 views per day, Wall is calling for robust was achieved. According to Wall, “NCBA price discovery in which packers have to buy a said they would hire a research analyst out minimum number of fed cattle on a cash marof academia who will look at the trade to see ket, bidding on finished cattle just like every if there is enough cash trade to make market other part of the industry. transparency. We know there isn’t. In the

Cattlemen have long realized that their Texas panhandle feedlots in 2015, only three calves and feeder cattle sell in a competitive percent of the cattle sold were cash. That market, yet fat cattle sell in what is essentially means 97.4 percent of the cattle sold on some a non-competitive market. Contracts, cattle type of formula or contract. How hard would bought on futures, confidentiality agreements it be for the packers to manipulate less than and buying behind a curtain of secrecy protect three percent? Yet everything else is sold off packers and feeders. It results in a captive marof that three percent value.” ket…because the packer can fill his daily quota Wall continued, “if we don’t achieve robust price discovery, then the NCBA says it will pursue regulatory or legislative solutions. But that will entail a series of hoops that we will have to jump through get back to where we are now.”

The push to get NCBA behind at least a 30 percent minimum cash market in a 14 day delivery period was important, according to Wall, because the government considers NCBA the voice of the beef industry. “They only set policy, but if their policy gets behind things, those things get done,” according to Wall. Even though, according to NCBA’s own figures, their paying membership of 25,000 is about three percent of the estimated 700,000 beef producers and feedlots in the nation, NCBA is still much bigger than other industry organizations and their voice carries a lot of influence when change is proposed.

BEEF INDUSTRY OR CATTLE INDUSTRY?

How could the NCBA fail to support a minimum cash requirement which would benefit the cow-calf producers, yearling operators, and backgrounders? It is all about votes, and the Texas Cattle Feeders Association (TCFA) and Kansas Livestock Association (KLA), whose combined feedlot capacity make up half of the fed cattle in the nation, had the volume and the checkoff dollars to outvote the state affiliates who represent the cattlemen. “It is ridiculous how many states would have to vote together just to outvote TCFA and KLA,” noted Wall.

“NCBA is the voice of the beef industry,” noted Wall. “Selling beef and selling cattle are two different things. This push for minimum cash market caused the NCBA to tip their hand and show everyone who they are made of, and who they would support. We found it was the corporate feedlots and the packers, not the ranchers. They don’t represent rancher Joe or rancher Bob, even though they collect their money from ranchers in the form of the Beef Checkoff.”

BUYING THEIR BULLETS?

As the National Cattlemen’s Beef Association clearly isn’t representing cattlemen, some have called for a referendum on the Beef Checkoff, which is funded by cattlemen but is now part of the NCBA (the organization was originally just the NCA, or National Cattleman’s Association, before they merged with the checkoff and incorporated Beef to become the NCBA).

“I don’t blame you people if you sign that referendum for the checkoff,” noted Wall in his Feeder Flash. “Selling beef and selling cattle are two different things, but our trade association is together. How can they speak for both of us? How can they represent the beef

WHAT ABOUT THE FEEDERS?

Wall warned cattlemen not to look to the feedlots to protect their interests. He stressed, “The typical commercial feedlot, 30,000 head or bigger, doesn’t care what the cattle market is. It is immaterial to them whether their feeder cattle cost .60, or $1.60, or $2.60. They buy cattle that they can hedge and put them on feed. They charge feed and yardage to those cattle, which makes the feedlot work. They feed for 150 days, and when they are ready to move them out, they put them on a showlist. It is easier for them to move cattle if they are already contracted to a packer.”

The feedlots have no leverage in the trading relationship; they take what the packer offers. They don’t want to rock their boat. They want to buy cattle cheap and hedge them, making their money from feed and yardage. But the man who is leasing ranches, the man turning cattle out to graze, the man who ponies up the money to feed a group of cattle through the feedlot, needs a real price for his cattle, and the money he gets for his cattle is the difference between staying in the business or losing the ranch. Even when he knows the packer is manipulating prices to the rancher, the feedlot operator won’t rock the boat with the packer, because that means the packer won’t buy from him next week.

TAKE DOWN THAT TWEET!

Feeders who are brave enough to post about packer concentration or abuse of power on social media have been contacted by packers and told to take down the post or tweet. Only after the offending post is taken down will the packers return to the feedlot to buy cattle.

“The packers have so much power, because so much of their supply is captive that they don’t really have to bid competitively,” Wall noted. “They are like the mafia who stroll into a store and say, ‘awful nice store, be a shame is something were to happen to it.’”

The feedlot operators aren’t the only ones bullied by packers. “My father used to say that the only difference between selling cattle on the rail and being robbed is that if you sell on the rail, you pay the freight,” noted Wall. “We can’t travel to the packer and peek in that window and see how our cattle perform. We are at their mercy.”

Feeder/Owners all have horror stories… men who know their genetics and know how their cattle grade and yield are told that their young cattle were over 30 months of age and paid accordingly. Or that they had dark cutters. Or that their cattle graded poorly. Because the cattle are sold on the grid and the packer determines what they are inside the packing plant, there is no recourse.

ADVICE FROM UNITED STATES DEPARTMENT OF AGRICULTURE

When the United States Department of Agriculture (USDA) was tasked with investigating the packers actions, they basically returned with a blueprint for the cattle industry to bring about accountability and robust price discovery in the market. That blueprint includes using the mandatory price reporting, which is already law and requires packers to report their purchase twice a day, to enable minimum cash requirements.

“It is kind of embarrassing for someone like the USDA to have to tell us how to fix our own industry,” Wall noted. “They said that anti-trust is hard to prove, and they won’t be prosecuting the packers. But they said if we were unhappy with the gouging and manipulation of prices, we could use their mandatory price reporting to easily facilitate the accounting needed for the minimum cash market requirement. However, the NCBA just thumbed their noses at the USDA.”

Though the COVID-19 pandemic highlighted the brokenness in the cattle markets, Senator Charles Grassley (R-Iowa) has been trying for years to clamp down on meatpackers and increase competition in the market. He first introduced legislation in 2002 to bring more transparency to cattle pricing, and again introduced legislation on May 12, 2020 with this same goal. The bill is cosponsored by both Republican and Democratic Senators and aims to amend the Agricultural Marketing Act (AMA) which is up for renewal in September. The timing may be perfect.

The Grassley bill requires packers to acquire no less than 50 percent of the cattle they will process within 14 days through spot-market cash sales from nonaffiliated producers. Sales agreements will be, “under circumstances in which a reasonable competitive bidding opportunity exists.”

Wall admitted that it goes against the grain for some people to consider government involvement in markets, but asks, “Who else can force the packers to cash markets?” The government is already involved in inspection and grading of cattle, and controlling how much weight can be hauled to market. “Why not include the government?” queries Wall. “We can ask packers nicely to buy on cash markets, and they won’t.”

As price reporting modifications are possible every five years, the Grassley bill will not be a piece of stand-alone legislation, but should go hand in hand with mandatory price reporting, which is up for renewal in September. However, the 50/14 bill has been stonewalled by Pat Roberts, the chairman of the Senate Ag Committee, who won’t bring the bill before the ag committee.

“Call your two state senators,” Wall instructed. “Let them know that they need to support the Grassley bill to save the rancher, the tax payer, the school systems, rural America. The bill isn’t for the packers or the feeders, it is to save the ranching industry.”

KNOW WHO REPRESENTS YOU

It goes without saying that the various groups who are supposed to represent the cattle industry have different thoughts on how price discovery should be handled. Below, in a nutshell, are three of those views:

United States Cattlemen’s Association (USCA) Senior policy analyst Jess Peterson says USCA wants to clarify price reporting, adding that USCA has made price reporting a key emphasis for more than 10 years. “When we look to the fundamentals of the cattle

market, there are just screaming differences in boxed beef prices and what producers are being paid,” Peterson explains. “Let’s have a look and ensure that the fundamentals are better aligned for the industry. You have to have a certain minimal number of cash trades to base a market on and reflect the true value for cattle. We don’t have that right now.”

National Cattlemen’s Beef Association (NCBA) says no to the Grassley Bill. South Dakota rancher Todd Wilkinson, policy division chair for NCBA, says the industry doesn’t need a government mandate. A better longterm solution to thin cash markets, Wilkinson believes, is encouraging more regional packers with increased capacity.

Ranchers-Cattlemen Action Legal Fund (R-CALF) has wanted to see Grassley’s bill adopted since 2002. “We have long recognized that meat packers were systematically shifting large volumes of cattle out of the cash market and placing them into captive supplies where no cash discovery occurs,” said Bill Bullard, chief executive officer of R-CALF. “Just eliminating confidentiality agreements won’t restore lost bargaining power between producers and meat packers.”

THE BEST AND WORST OF TIMES

Packers and feeders use alternative marketing agreements which cut their costs and drive up profits, and they do so at a cost to cash market price discovery. This is a double-edged sword, as their confidential, non-disclosed agreements use the cash markets as a benchmark for determining price…so the lower they drive the cash market, the better off they will be. And the worse off the producer will be.

While packers have increased cash trades in recent weeks due to increased scrutiny, four foreign owned packers still collectively control more than 80 percent of the U.S. slaughter market for beef, and past behavior clearly indicates a willingness to gouge, control and manipulate the market.

It is time to act. The Agricultural Marketing Act (AMA) is up for renewal in September. The Grassley legislation should accompany that act. Contact the industry organization which aligns with your values and support them. Reach out to Senator Charles Grassley’s office. Contact your two state Senators and ask them to support the Grassley bill. Contact your representatives, — a similar bill is going through the House. Contact the candidates for office in your state. Be informed. Be educated. Be heard. ▫