Market forecasts, other signs indicate better days on the horizon

The National Cattlemen’s Beef Association works with USDA to aid the cattle market

BY TANNER BEYMER Director of Government Affairs and Market Regulatory Policy for the NCBA

Like countless others, I was glad to put 2020 in the rear-view mirror. Honestly, I will not be heartbroken to do the same with 2021.

While we have made welcome progress from the darkest days of the pandemic, recovery has come sluggishly. There is undoubtedly more improvement to be done, but recent developments in Washington, D.C., and long-term market forecasts suggest that better days are on the horizon.

The National Cattlemen’s Beef Association’s top policy focus this year has been to advocate for a business climate that increases opportunities for producer profitability across the board.

As we have looked for ways to accomplish that goal, we have identified three major focus areas: expanding beef processing capacity, improving price discovery and increasing market transparency. I am pleased to say that we have gained ground in each area.

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BEEF PROCESSING CAPACITY

Beef demand is strong, both domestically and in our major export markets, and there are plenty of cattle to satisfy that demand. However, since 2016 there has not been sufficient capacity to harvest them. The packing sector is currently the choke point in our supply chain, slowing the flow of cattle down the chain and the flow of margin up to the cattle feeder, stocker and cow-calf producer. It is imperative that the industry return to full utilization of existing capacity, and then expand upon it with local, small and regional plants.

Following several conversations with the NCBA, the U.S. Department of Agriculture announced that it will make major investments in meat and poultry processing. All told, roughly $600 million will be accessible via grants, federally guaranteed loans and technical assistance programs to both new market entrants and existing businesses.

The industry has already answered the call to expand hook space — several new plants and expansions have been announced and are in various stages of development. As an Idaho boy, I was especially pleased to see some of this new capacity come to the Gem State. We expect this federal assistance to help these capital-intensive enterprises get up and running.

PRICE DISCOVERY

Many are likely aware that we tripped our second major trigger under NCBA’s voluntary approach to achieve robust price discovery in the fed cattle market (sometimes called the “75% Plan”). While that does mean that we will now pursue some sort of regulatory or legislative solution to improve price discovery, it is important to note that we have not changed our position on the existing bills introduced in Congress. We remain opposed to cash market mandates.

What the second trigger means is that our membership — cattle producers like you — will give us direction on how to proceed from here. The Live Cattle Marketing Committee meeting at our 2022 convention in Houston will serve as the venue for that discussion, and NCBA members are encouraged to attend.

A second trigger should not detract from the progress we have made, however. Negotiated trade is up this year, particularly in the southern Plains, where price discovery was lacking most. Additionally, the NCBA’s persistence led to formal information-sharing agreements with the four major packers to evaluate their partic-

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The cattle market is easily the most complex commodity market on earth. … It will take a full suite of informed policy solutions to make our supply chain more resilient and ensure profitability at all stages of cattle production.

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ipation in negotiated trade. This information is still collected and analyzed by a third party, and will prove insightful going into discussions in Houston.

MARKET TRANSPARENCY

Information is power, and the NCBA has led the charge to give more information to cattle producers under Livestock Mandatory Reporting. In August, the USDA began publishing the National Daily Direct Formula Base Cattle report and the National Weekly Cattle Net Price Distribution report. Both have shed new light on the formula transaction bucket, which is most commonly used to trade fed cattle.

The association additionally secured introduction of the Cattle Contract Library Act. Led by Reps. Dusty Johnson, R-S.D., Henry Cuellar, D-Texas, and an impressive list of bipartisan co-sponsors, this bill would require the USDA to establish and maintain a searchable library of the contracts offered by packers to producers.

The library would be subject to confidentiality rules, but would allow producers to compare their marketing agreements to others. The bill was marked up by the House Agriculture Committee within 48 hours of being introduced, and as of this writing

awaits consideration by the full House of Representatives.

We are also looking more closely at market transparency through a working group established during our 2021 annual convention in Nashville. This group is made up of 25 cattle producers from across the country and regularly meets to explore market transparency; LMR confidentiality; economic research; Packers and Stockyards; reporting thresholds; and captive supply.

The group will submit its report, and any recommendations for policy, to the Live Cattle Marketing Committee for consideration at the annual convention in February.

The cattle market is easily the most complex commodity market on Earth, and the challenges we have endured over the years have been equally complicated. It will take a full suite of informed policy solutions to make our supply chain more resilient and ensure profitability at all stages of cattle production.

Through continued partnership with state affiliates such as the Idaho Cattle Association, the NCBA will remain engaged in Washington to bring those solutions to fruition.

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