Proposed rules in the U.S. would mandate a certain level of cash cattle sales

The U.S. Cattle Transparency Act introduced this year seeks transparency for our southern neighbour’s cattle market by mandating large-scale meat packers — those that slaughter over 125,000 cattle per week — to flow through the cash market, instead of alternative marketing arrangements.

An earlier iteration of the bill included a 50:14 rule, where 50 per cent of cattle go through a mandated cash trade, with a 14 day-delivery term. This newest bill doesn’t include that 50:14 rule, but instead a mandatory minimum threshold of negotiated cash trade, but it’s not specified what the threshold would be.

“The beef industry has gone through turmoil, just like every other industry it seems,” says Greg Henderson, editor of Drovers. “We have producers that are up-in-arms with the way cattle are being marketed, and obviously the fact that packers may accept these profits this year, while producers are losing money.”

The bill also requests that the USDA create a library of marketing contracts between packers and producers and that packers report the number of cattle to be scheduled to delivery in 14 days. The intent of the bill, according to Henderson, is to eliminate alternative marketing arrangements — contracts between packers and feeders that don’t utilize the cash system. (Story continues below)

Listen in on the full conversation below for Henderson’s views on the packing industry’s role in the market, under the potential new mandates: 

“There are two factions within the U.S. cattle industry — there’s the group that wants these changes, there’s the group that wants the mandate that packers have to buy at least 30 per cent, and some 50 per cent of the cattle in the cash trade every week,” says Henderson. “The other side of that coin is that people, since the mid 1990s, have been entering into these marketing arrangements where the cattle have a home almost the day they enter the yard, and they’re going to be sold based on a grid.”

Basically, the better quality cattle get priced on the grid system,, taking them out of the cash trade which leaves the lower quality cattle in the cash trade, reducing cash prices.

The second version of the bill also mandates that USDA release information about those contracts without divulging personal information. More information out there may create more transparency in the markets and create a better situation for producers, but the problem is how to get to that point, and how to get these systems to do what the bill is seeking to be done, says Henderson.

Legislative moves like that in the U.S. aren’t happening in Canada, but the results of the proposed bill, if it comes to fruition could affect prices here in Canada, because so much is derived by the U.S. market.

You can view Henderson’s coverage of the Cattle Transparency Act here.

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