For Immediate Release: July 21, 2020
Contact: R-CALF USA CEO Bill Bullard
Phone: 406-252-2516; firstname.lastname@example.org
Billings, Mont. – In an unpublished 2014 investigative report by the Packers and Stockyards Division of the U.S. Department of Agriculture (formerly the Grain Inspection Packers and Stockyards Administration, or GIPSA) titled Investigation of Beef Packers’ Use of Alternative Marketing Arrangements, the agency found, based on 2009 data, when the volume in the fed cattle cash market was nearly 40 percent, that alternative marketing agreements depressed the prices paid for cattle on the cash market. Based on GIPSA’s findings, we estimate that nationwide domestic cattle prices in the cash market were reduced by as much as $33.28 per head (based on a 1,300 lb. steer) in 2009.
In regions such as Kansas, Texas-Oklahoma-New Mexico, and Colorado, where the volume of the cash market was significantly less than the national average, using GIPSA’s findings, we estimate that the harm to the cash market was much greater: as much as $50.44 per head in Kansas, $44.46 per head in Texas/OK/NM, and $42.77 per head in Colorado.
Also, the report found that every one percent increase in captive supply cattle, which necessarily corresponds to a reduction to the cash market volume, depressed negotiated cash prices $0.54 per head for a 1,300 lb. steer on average.
R-CALF USA CEO Bill Bullard said this would extrapolate to a $5.40 per head loss for cash cattle sellers for each 10 percent reduction in the volume of the national average cash market below 40 percent. And, he said the loss would be significantly more in those low cash-volume regions such as Kansas, TX/OK/NM, and Colorado.
“This report, based on actual market data from 2009, firmly supports Senator Grassley’s and Senator Tester’s Senate Bill (S.3693) and Congresswoman Cindy Axne’s House Bill 7501 (H.R.7501) that restore the integrity of the thinning cash market by requiring packers to participate in the negotiated cash market at least at the 50 percent level,” Bullard said.
Bullard added, “It is clear that the report’s finding of significant producer losses associated with nearly a 40 percent cash volume level is unacceptable and bringing the volume up to 50 percent will at least minimize some of that harm to cattle producers who trade on the cash market. On the other hand, lowering the cash volume to only a 30 percent cash volume level is stripping almost $39 per head of income from cattle producers nationally, and significantly more from cattle producers selling in the low cash-volume regions.”
The report states that its findings in the investigation are generally consistent with prior studies, “though somewhat larger in magnitude.”
Bullard said he is disappointed that after finding significant harm to prices in the negotiated cash market, the report nevertheless concluded that the harm to cash-cattle sellers is offset by benefits to beef packers, the beef marketing industry, consumers, and producers (those who choose not to market in the cash market).
“But the report acknowledges that negotiated cash market sellers are likely harmed by the increase in captive supplies without receiving any of the offsetting benefits,” Bullard commented.
Bullard said this is the key point for policy makers: that producers who market in the negotiated cash market are being harmed and most of them are the small to mid-sized cattle feeders that are needed to support America’s rural economy.
“This is one reason we’ve lost 75 percent of our nation’s independent cattle feeders during the past two decades – our nation’s farmer-feeders no longer have a competitive market in which to sell their cattle and this has been the situation for years,” he concluded.
The 2014 Packers and Stockyards Division’s investigative report can be accessed at www.r-calfusa.com under “Issues” and then “Competition/Antitrust Issues.”
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R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) is the largest producer-only lobbying and trade association representing U.S. cattle producers. It is a national, nonprofit organization dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. Visit www.r-calfusa.com or, call 406-252-2516 for more information.