The North American Meat Institute said a new Senate bill ignores the analysis of beef and cattle markets by the country’s leading agricultural economists and the bill’s mandated government intervention will have unintended consequences that will hurt livestock producers and consumers.
“Beef and cattle markets are dynamic. This fall prices cattle producers received for their livestock have risen without any government interference,” said Julie Anna Potts, President and CEO of the North American Meat Institute. “In a rush to do ‘something,’ this bill would replace the free market with government mandates and harm those it is intended to protect: livestock producers.”
The Senate bill, which was announced but apparently not finalized because no language has been released, would require packers within a region of the country to purchase a government-mandated minimum number of cattle through negotiated or cash transactions. It would also establish a cattle contract library and loosen confidentiality requirements for USDA’s publication of data.
No economic analysis of the bill’s effects has been offered to support the legislation.
“If this bill becomes law,” said Potts, “there will be cattle producers who want alternative marketing arrangements, but will instead be forced to sell on the cash market, and the industry will turn back time to the days of commodity cattle.”
The Bill Ignores Economic Analysis of the Beef and Cattle Market’s Behavior
According to one independent analysis using USDA data, since August, prices for producers have been well above the five-year average and above prices in 2020.
Last month, Texas A&M University published a book called “ The U.S. Beef Supply Chain: Issues and Challenges, ” a collaboration with Texas A&M’s Agricultural and Food Policy Center, national experts, and the U.S. Department of Agriculture.
In the book the nation’s leading agricultural economists warned members of Congress against mandated minimums on negotiated or cash transactions because it will cost producers in in the form of lower prices: “While some argue that imposing mandatory minimums on negotiated (or cash) transactions would improve price discovery in the fed cattle markets – accruing benefits to the cow/calf producer in the process – authors in this book argue it could have the opposite effect, potentially imposing huge costs that are passed down to cattle producers in the form of lower prices.” (Page xi)
The Bill Ignores Expert Testimony before House and Senate Agriculture Committees
In testimony before the United States Senate Committee on Agriculture, Nutrition, & Forestry Hearing, “Examining Markets, Transparency, and Prices from Cattle Producer to Consumer,” Mark Gardiner, President Gardiner Angus Ranch said this, “Finally, it is my desire to indicate to this group as strongly as I possibly can, please do not create regulations and legislation that have the unintended consequence of harming value-based marketing. Doing so would undo many years of progress for producers such as my family and those of our customers. Onerous legislation has the potential to result in a reversal of quality that is simply unacceptable to consumers. Legislation limiting progress (and ultimately is a detriment to quality beef production) punishes America’s beef producers.”
“Even if 100 percent of cattle were being sold on the cash market, it doesn’t mean prices would have been any higher than what we recently observed.” Dr. Jayson Lusk, Distinguished Professor and Head of the Department of Agricultural Economics, Purdue University, West Lafayette testifying before the House Agriculture Committee Subcommittee on Livestock and Foreign Agriculture.
“Stated directly – without contemporary use of Alternative Marketing Agreements (AMA’s) I believe cattle prices would be lower as production efforts would not align as well with consumer demands.” Glynn T. Tonsor Professor, Dept. of Agricultural Economics Kansas State University testimony before the United States Senate Committee on Agriculture, Nutrition, & Forestry Hearing, “Examining Markets, Transparency, and Prices from Cattle Producer to Consumer.”
“After three Congressional hearings featuring the testimony of industry experts and a major economic analysis of the beef supply chain out of Texas A&M, Senators continue to ignore market fundamentals and are attempting to guarantee higher prices for livestock producers,” said Potts. “The industry has resisted allowing the government to pick winners and losers in the past and all sectors of the beef supply chain: cow-calf producers, feeders and packers have benefitted.”
For more information from the Meat Institute on beef and cattle markets see:
On Market Structure and Capacity: Meat Institute’s Public Comments in Response to Secretary Vilsack’s Request for Information on Investments and Opportunities for Meat and Poultry Processing Infrastructure