By Garrett Hawkins
As livestock producers, we strive to care for our animals and raise a wholesome product for our family, friends and neighbors. In return, we want a fair price for our livestock, which is increasingly difficult these days.
Last spring, the COVID-19 virus crippled the meat and poultry supply chain. The fallout from disruptions in processing and transportation fell squarely on the shoulders of livestock producers. A few dominant meatpackers certainly seemed to put the squeeze on farmers and ranchers while making record profits. Notably, four major packers control more than 80 percent of today’s U.S. beef packing industry.
An August 2019 fire at a processing facility in Holcomb, Kansas, and disruptions during the pandemic reignited long-standing concerns about transparency in cattle markets. In recent months, the dramatic spread between the price producers are receiving for fed cattle and the price packers are charging for wholesale boxed beef going into the supply chain has further fanned the flames of frustration among farmers, ranchers and feeders. The end result squeezes the pocketbook of both consumers and producers.
In late May through early June this year, packers were making a profit in excess of $1,100 per head while cattle feeders were struggling to break even. At the same time a year ago, the same packers were making upwards of $1,100 per head while cattle producers netted losses of over $300 per head. Keep in mind, packers were raking in these profits on cattle they had owned for less than seven days.
To address concerns of competitive imbalance, U.S. Representatives Vicky Hartzler (R-Mo.) and Emanuel Cleaver (D-Mo.) recently introduced the Optimizing the Cattle Market Act. Currently, the price for the vast majority of cattle sold is based on less than 20 percent of the cattle that are actually traded on the negotiated spot cash market. This results in limited price information to establish the base price for formula contracts and forces producers to be price takers instead of price makers. The Hartzler and Cleaver bill would establish regional mandatory minimum thresholds of negotiated cash trades in cattle marketing while allowing for flexibility across regions.
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