In today’s Beef Buzz, senior farm and ranch broadcaster Ron Hays continues his conversation with Oklahoma State University Extension livestock market economist Dr. Derrell Peel about USDA’s new five-state negotiated cash cattle price reporting system and what it could mean for cattle market transparency. Peel also discussed President Donald Trump’s plan to increase lean beef imports, explaining why actual market demand may limit how much imported beef enters the country. Part one of this conversation can be found here.
USDA’s Five-State Cash Cattle Reporting System Offers a Short-Term Solution
Peel said USDA’s new five-state reporting system addresses a growing challenge in cattle price discovery as negotiated cash trade has declined and alternative marketing arrangements have become more common. “Our price reporting system is based on negotiated cash trade, but there’s lots of industry incentives to trade cattle in some sort of a formula arrangement or whatever, often based on that cash trade,” Peel said.
As these alternative arrangements have grown, the volume of negotiated cash transactions has declined, making it more difficult for USDA to publish reliable prices while protecting the confidentiality of individual market participants.
Peel explained that USDA had been unable to report cash cattle prices in Colorado for an extended period. More recently, Kansas, Texas and Oklahoma also experienced insufficient trade volumes for reporting. “We really haven’t had any cash prices for fed cattle since about July in the Southern Plains,” Peel said.
By combining the regions into a five-state reporting area, USDA can capture enough trade volume to provide more consistent price information. “So it’s a help in the short run because the market’s been operating without that information,” Peel said. “It’s a different information, so we’ll have to figure out exactly how to interpret it in some cases.”
The expanded reporting area should help provide more consistent price information, but Peel said it does not fix the larger problem. “The reality is, it’s probably a short-term solution,” he said. “I suspect the underlying issue is going to continue to develop over time. So we’ll probably have to revisit this again at some point in the future.”
Industry Participation Remains Key to Cash Price Discovery
Peel said the cattle industry faces a challenge because market participants benefit from having transparent cash prices, even as individual feedlots and packers have incentives to use other marketing arrangements. “Cash trading is something we like to have that, but there’s reasons not to do it from the standpoint of both feedlots and packers,” Peel said. “It’s a bit more of a hassle. There’s some additional transactions cost associated with it.”
He described the situation as a public-good problem, in which the industry wants reliable price information but may prefer that other participants generate the negotiated cash transactions needed to produce it. “At the end of the day, I think the industry is going to have to face some reality here,” Peel said. “That if you want to have cash prices reported in this market, somebody’s going to have to trade cash cattle.”
Peel said industry participants may need to make arrangements to ensure that at least a minimum level of negotiated cash trade continues.
Although some lawmakers, including Sen. Chuck Grassley, have discussed mandating cash trade, Peel cautioned against relying on broad government requirements. “You got to be really careful when you do that because the cattle industry is very diverse in lots of ways,” Peel said. “One size fits all, top down solutions is typically not a favorable thing.”
He emphasized that cattle price discovery remains an ongoing issue that requires continued attention and careful consideration.
Market Demand Could Limit Lean Beef Imports
Hays also asked Peel about President Donald Trump’s plan involving 300,000 metric tons of lean beef imports and whether the market would respond as expected.
Peel said the United States was already importing beef to meet specific market needs before the plan was introduced. Removing tariffs could make those imports less expensive, potentially encouraging some additional purchases, but he does not expect imports to reach the full amount allocated. “The reality is the market was already getting about as much imported beef as it wanted,” Peel said. “We used that imported beef in specific ways, and we were getting it. Now we can get it without a tariff.”
Peel pointed to preliminary September data suggesting imports had fallen short of that month’s allocation. “The preliminary data for September would suggest that we didn’t import anywhere near the allocation for that month,” he said.
He expects overall imports to remain below the plan’s total amount because domestic buyers were already sourcing imported beef according to their needs. “I don’t think we’re going to import anywhere near that total amount of beef because again, the market was already getting what it needed,” Peel said.
As a result, Peel does not expect the plan to significantly change the beef market or deliver the level of price impact some may anticipate. “So, it won’t change things a great deal, I don’t think, and it probably won’t have the kind of market impacts and price impacts that maybe we’re hopeful,” Peel said.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Ag Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR above for today’s show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
