WASHINGTON, D.C. – The newly-introduced Cattle Market Transparency Act of 2021 would bring much needed changes by increasing transparency in U.S. cattle markets, according to the American Farm Bureau Federation (AFBF). 

Sponsored March 2 by Sens. Deb Fischer (R-Neb.) and Ron Wyden (D-Ore.), the bill would focus on “ensuring robust regionally-negotiated cash trade and providing producers with more pricing information,” said AFBF President Zippy Duvall.

“America’s ranchers don’t control the prices they are paid for their products, and those raising livestock have legitimate questions about pricing,” he said. “When the pandemic hit, meat prices at grocery stores went up, while the prices paid to farmers fell through the floor.

“This legislation will ensure farmers and ranchers have fair access to markets, and are fully informed on pricing so they can continue to put food on the table in homes across the country,” he added.

The bill would mandate new reporting requirements and address confidentiality guidelines in Livestock Mandatory Reporting, such as requiring a packer to report the number of cattle scheduled to be delivered for slaughter each day for the next 14 days.

Fischer, a member of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, and Wyden reintroduced the act after it failed to gain any traction when Fischer first filed it last year during the 116th Congressional session.

“I am pleased to reintroduce this bill with bipartisan support,” Fischer said. “It will help facilitate price discovery, and provide cattle producers with the information they need to make informed marketing decisions. I am committed to working across the aisle to advance the bill forward this Congress.”

The bill would require the USDA secretary to establish “regional mandatory minimums for the purpose of enhancing price discovery and transparency for cattle market participants,” said Michael Nepveux, AFBF economist.

“In developing these thresholds, the bill directs the (USDA) secretary to consider the number of packers in the reporting region, the availability of cattle in the reporting region, pre-existing contractual arrangements of packers in the reporting region, and the number of pricing transactions in the reporting region,” he said.

He said the bill would also mandate that the initial requirement for the regional mandatory minimums be greater than the three-year average percentage of the negotiated and negotiated grid purchases for the individual regions.

“These requirements would be subject to a review every two years under consultation with the USDA’s Office of the Chief Economist, to establish regionally-sufficient levels of negotiated cash and negotiated grid trade, seek public comment on those levels, then implement,” he said.

He said negotiated purchases – often referred to as the ‘spot’ or ‘cash’ market – are purchases for which the price is determined through buyer and seller interaction on the day of sale. Forward contract purchases are agreements for the purchase of cattle executed in advance of slaughter; the base price is established in the agreement.

With negotiated grid purchases, he said the base price is negotiated between buyer and seller, and is known at the time the agreement is made, but the final price is determined by applying a series of premiums and discounts based on carcass performance after slaughter.

He added formula purchases are the advance commitments of cattle for slaughter by any means other than negotiated, negotiated grid or forward contract. “Importantly, formula pricing uses a pricing mechanism in which the price is often not known until a future date,” he said.

Moreover, the bill would require the USDA to create and maintain a publicly-available library of marketing contracts between packers and producers in a manner that ensures confidentiality.

The bill would also require that within three years of enactment, the USDA conduct a data-driven cost-benefit analysis regarding the operation and effect of the regional mandatory minimums.

In turn, the bill would prohibit the USDA from using confidentiality to justify not reporting, and makes clear that the USDA must report all Livestock Mandatory Reporting information, “and they must do so in a manner that ensures confidentiality,” Nepveux said.

He said the bill aligns with the goals set forth last year by the AFBF’s Cattle Market Working Group, as well as new cattle marketing policy passed by the federation’s voting delegates at the 102nd Annual Convention in January.

Duvall said, “We appreciate Sen. Fischer and Sen. Wyden for introducing the Cattle Market Transparency Act of 2021, and look forward to working with members of the House on a companion bill introduction.”