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US Senators lead legislation to bring more transparency and accuracy to livestock markets

14 May 2020

US Senators Chuck Grassley (R-Iowa) and Jon Tester (D-Montana) propose bipartisan legislation to increase proportion of "spot" payments meat packers are required to negotiate.

Rolling out the second plank of the Rancher Relief Plan to bring critical support to Montana cattle producers who have been hit hard by the coronavirus pandemic, US Senator Jon Tester, the Senate’s only working farmer, introduced bipartisan legislation to increase the proportion of cash payments in the cattle market to improve pricing transparency and provide stability to independent producers and small feeders.

Tester’s bipartisan bill would require large-scale meat packers to increase the proportion of negotiable transactions that are cash, or "spot," to 50 percent of their total cattle purchases. This would improve accuracy of formula pricing—which currently accounts for a significant portion of transactions—and increase transparency for producers and feeders.

“Market consolidation in the livestock industry is making it harder and harder for producers to meet their bottom lines, especially as large packers rely on fewer spot transactions to purchase live cattle at the farm gate,” said Tester. “This bill will force meat packers to engage in more spot transactions, bringing up formula prices and making them more accurate while giving Montana producers and feeders more flexibility and transparency when they bring their livestock to market.”

Market consolidation by large scale meat packers has enabled them to artificially lower prices of cattle per hundredweight while turning record profits, hurting Montana’s small-scale ranchers and feeders in the process. Packers have been accused using the small percentage of spot transactions they accept to help set formula prices far lower than they should be. Tester’s legislation aims to increase the proportion of spot transactions used in livestock sales, allowing producers more ability to negotiate prices and creating larger, more accurate formulas and futures.

Tester’s Rancher Relief Plan is made up of a series of initiatives to help provide certainty to Montana’s small and medium sized cow calf operators. These bipartisan initiatives include:

  • Increasing interstate commerce and diversifying meat production in Montana and neighbouring states;
  • Legislation to ensure fair prices at the farm gate from large packers;
  • The first bipartisan Senate push for mandatory Country of Origin Labelling since Congress repealed it in 2015.

In recent weeks, Tester has led the fight to provide certainty for Montana ranchers in the face of the coronavirus pandemic. Late last month, Tester demanded that Attorney General William Barr, in coordination with the US Department of Agriculture, open an investigation into reports of price fixing in the cattle market in the wake of the coronavirus pandemic. Additionally, after Montana’s ranchers recently saw the steepest price decline for cattle in forty years, Tester pushed Secretary of Agriculture Sonny Perdue to take immediate action to stabilise beef markets.

Industry Response

National Cattlemen’s Beef Association (NCBA) Policy Division Chair and South Dakota Rancher Todd Wilkinson today has greeted the proposed legislation cautiously, saying:

"Currently, cattle producers utilise a multitude of methods to market their livestock, including the cash market. Increased price discovery will benefit all segments of the cattle industry — that is why NCBA has been closely working with key stakeholders, industry experts, and our partners in academia to develop tangible means to meet that end. Any solution must not restrict an individual producer’s freedom to pursue marketing avenues that they determine best suit their business’ unique needs. Government mandates, like that being proposed by Senator Grassley, would arbitrarily force many cattle producers to change the way they do business. We will continue to work toward a more equitable solution and invite Senator Grassley, and other lawmakers interested in this conversation, to join us in the search for an industry-led solution based in free market principles."



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