Work continues on finding solutions to problems in the cattle markets
For years the cattle industry has been struggling with a price imbalance that has fueled the frustrations of many producers. Wednesday’s Senate Ag Committee hearing addressed the lack of transparency in the markets and the stranglehold packers have on the cattle industry.
Justin Tupper, vice-president of the US Cattlemen’s Association says improved price discovery only happens with a second bidder, or increased competition. “If you talk to any of these small or mid-sized feedlots that do not have already an arrangement with a packer, they do not get a second bidder,” he says. “And they can’t get one. And they (the packers) tell them that you have to take this bid because otherwise there isn’t a chain or shackle space for you.”
Tupper says transparency is crucial to keep smaller cattle producers competitive. “Confidentiality kills LMR,” he says.
Through LMR, or the Livestock Market Reporting Act, packers and importers submit purchases and sales of livestock and livestock products to USDA’s Agricultural Marketing Service. It was originally designed to encourage competition in the marketplace and is up for reauthorization later this year.
Kansas State ag economist Glynn Tonsor says some changes to LMR could be made that could increase transparency in the markets. “Things like adding information to the distribution of prices, speaking to not just the mid-max range, but 15th to 18th percentile can add information to those who are wanting information to negotiate differently or understand the cattle type, value, etc.,” he says.
He says there are other potential solutions, but would require changes to how data is collected. “Currently we have whole-state aggregation,” he says. “So the way the data is reported we know if that transaction was in Nebraska, Kansas, or not,” he says. “Potentially refining that would allow us to examine other ways to report that might help.”
Alternative Marketing Arrangements also came under fire. Mark Gardiner, a cattle producer from Kansas testified that producers who have made investments in improving genetics, feed and management to improve the quality of their cattle, shouldn’t be forced into a “one-sized fits all” pricing system. But, instead, has a different suggestion. “And that’s why when we look at the information and the thinly traded cash market, if we can put all base prices of formula, grid, and AMAs into the mandatory price reporting, this is the base price,” he says. “And that becomes all-inclusive, then we’re going to have a more robust, more transparent market.”
Both Tupper and Gardiner agreed more information in the price reporting from packers would benefit producers.