Beef Buzz News
Two Producers, Two Points Of View At The Senate Agriculture Committee Hearing On Cattle PricesThu, 24 Jun 2021 10:38:49 CDT
On Wednesday, the Senate Agriculture Committee held an official hearing on market transparency and the need to fix the markets. Two cattle producers, two market economists, and one social engineer were involved, totaling five witnesses who presented to the senators. Several senators “testified” as well, sharing their points of view during time they were allocated for questions.
Of the two producers present, the first lead off witness was from the U.S. Cattlemen’s Association, Justin Tupper, who said there has to be more cash market price discovery.
We need the government to step and help make that a reality, he added.
“We are losing our producers at an alarming rate,” Tupper said, “all the while watching big corporate feeders and packers make record profits with the threat of vertical integration hanging over our heads.”
Tupper said there is not enough transparency in the market place and there is not enough competition among those who are wanting to buy cattle from feedlots and cattle producers.
In his auctioneering experience he has learned the most important participant in true price discovery is the second bidder, he said.
He followed up saying in fed cattle market encounters, there is not even a second bidder present.
The second cattle producer to testify was Mark Gardiner of Gardiner Angus Ranch in Ashland, Kansas. He is also an original participant in U.S. Premium Beef.
Gardiner offers the viewpoint that this is all about economics – supply and demand.
“Today, we have too many cattle and too little processing capacity,” he said. “We have a volatile market place created by outside, unavoidable factors.”
Gardiner believes the market place is solving the problem, but it will take time.
The solution for all of this very complicated, Gardiner said. Processors are adding capacity due to the demand for high quality beef, and adding this capacity will simply take time.
The question for us to answer in the meantime is ‘how much damage will regulations do to the marketplace by artificially manipulating the pricing mechanisms?’
Gardiner believes experience tells us the consequences of the aforementioned actions can create longer lasting havoc and even greater volatility to our industry.
The two producers disagreed as to whether or not Uncle Sam should step in and mandate how cattle should be marketed, but they did agree we need to renew the Livestock Mandatory Price Reporting rule and that additional price discovery and transparency would be beneficial for the marketplace.
An interesting perspective Tupper offered late in the hearing related to the concept of confidentiality.
One of the current problems with the Livestock Mandatory Price Reporting rule is that in many areas of the United States, there are not enough market participants to allow the USDA to publish some of the data they have received.
Tupper says this has to end.
“If there is not enough participants in the market, we cannot report it,” he said. “The trouble with that is, in a fat cattle market today… if somebody is bidding $1.26, which I got texted this morning, everybody in the industry knows it.”
Tupper then claimed the confidentiality rule that is fallen back on, the 3/70/20 Guideline, does not fit for the industry.
Every time he goes to the USDA, Tupper said he gets “shot backwards” because he “threw up all over confidentiality,” but that is one of big things. They just cannot fit it all in there, he added.
This means the USDA gets more information than they can publish under confidentiality rules. Tupper said this needs to change when the Livestock Mandatory Price Reporting rule is rewritten.
You can review all of the written testimony submitted for the hearing and check out the video of the entire hearing by clicking here.
Click on the LISTEN BAR below to hear more from the Senate Ag Committee hearing.
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