Price transparency bill advances through Congress
Introduced earlier this fall, the Cattle Contract Library Act of 2021, which creates a database to help provide cattle producers leverage as well as price transparency in the market, advanced from the House Agriculture Committee on Oct. 21.
Bill sponsor Rep. Dusty Johnson (R-SD) called the bill “no silver bullet,” but “consensus-based.” Rep. Henry Cuellar (D-TX) co-sponsored the bill. Producer-based organizations, including the National Cattlemen’s Beef Association (NCBA), the American Farm Bureau Federation, the Livestock Marketing Association and the U.S. Cattlemen’s Association, were reported to have come to a consensus on the need for increased price transparency through a cattle contract library during a meeting this summer.
Johnson notes, “This [price discovery] used to be easy in the cattle market, when a majority of cattle went to the sale barn and everyone could see exactly what the bids were. But, as sales moved away from cash markets and to alternative market agreements, transparency has been harder to come by.”
NCBA President Jerry Bohn shares in an Oct. 22 Beltway Beef podcast this legislation is the first step in the right direction in what he hopes will correct the cattle pricing imbalance.
Increasing availability of market information
“There has been a lot of concern across the industry about the markets, and there has been a lot of change in how cattle are marketed across the country,” Bohn explains. “Alternative marketing arrangements are now very popular and the result is there is less negotiated trade in our markets.”
According to Bohn, the Cattle Contract Library Act will allow the opportunity for producers to gain exposure to different marketing alternatives and explore the terms of negotiated contracts.
“It looks like producers could find out premiums and discounts based on quality grade, yield grade and carcass weight, as well as learn about the duration of [previous] agreements and all of the requirements a producer would have to meet in order to participate in that market,” he says. “It would help to make better and more informed marketing decisions.”
As the bill is currently written, the secretary of agriculture would be required to establish and maintain a library of each type of contract offered to producers by packers for the purchase of fed cattle as well as any premiums or discounts outlined within the contract.
Weekly or monthly reports would include: type of contract; duration of the contract; total number of cattle committed to the packer each week within the six-month and 12-month periods by region and contract type; contracts with an open commitment for weekly, monthly, annual or other limitations on number of cattle to be delivered; and a description of the provisions within contracts which provide for expansion in number of cattle committed to delivery under contract for the six-month and 12-month periods by region and contract type.
Creation of a contract catalog
According to a press release from the office of Rep. Johnson, the concept of providing price discovery and market transparency to producers through a contract library is not new to the U.S. Department of Agriculture (USDA). In fact, the USDA currently maintains a pork contract library, and the USDA’s July 2020 Boxed Beef and Fed Cattle Price Spread Investigation Report recommended the creation of a library.
“Producers have been asking for increased transparency and leverage in the cattle market for years, and the Cattle Contract Library Act will provide granular data in near real time, ensuring producers understand the value or marketing agreements,” Johnson explains. “Data drives marketing decisions and a contract library will provide much-needed leverage for independent producers.”
While many producer-based organizations and legislators support the idea of the contract library, some believe the consequences of the bill may not be fully understood.
Julia Anna Potts, the president and CEO of the North American Meat Institute comments, “More time is needed to consider how the bill will affect livestock producers, feedlot operators and packers and processors. Due to the limited time allowed to consider the legislation, we ask the House to pause and include packers in the conversations, since the packers would bear the burden of complying with this new government mandate.”
She adds, “There is already robust price discovery provided by beef packers on a daily basis.”
“You can’t have price discovery if you don’t have transparency,” Johnson notes.
Averi Hales is the editor of the Wyoming Livestock Roundup. Send comments on this article to email@example.com.