Cattle Markets’ Transparency Test
Show me the cattle market transparency.
Senators Deb Fischer (R-Neb.) and Ron Wyden (D-Ore.) introduced the Cattle Market Transparency Act of 2021, which builds on years of research and discussion of negotiated trade of fed cattle.
Refresher: Negotiated trade or references to the spot/cash market is when a buyer and seller interact and determine an agreeable price on the day of sale. In the mid-2000s, 50%-60% of cattle sold went through the negotiated market. Over time, cattle producers have shifted to using formulas, grids, and other alternative marketing arrangements (AMAs) that help them manage risk and take home more bacon.
As a result, about 20% of cattle transactions are currently negotiated purchases with significant regional nuances.
The catch: AMAs depend on the price discovery from those direct, buyer-seller interactions. The cattle industry is united in agreement with economic research, saying there’s just not enough negotiated trade to provide sufficient price discovery.
But how the industry should go about making that change is where things get hairy.
Fischer’s bill calls on the USDA to set regional minimums of negotiated trade of fed cattle, establish a library of cattle formula contracts, and increase market data reports.
Where things stand: The American Farm Bureau Federation and U.S. Cattlemen’s Association are on board, but the National Cattlemen’s Beef Association is not down with the new approach yet…at least not until their voluntary industry plan fails to achieve enough price discovery.