Iowa Reps bring 50/14 companion bill
Three of the four Iowa Representatives introduced a bill on Thursday to require packers to procure 50 percent of their weekly slaughter needs on the cash market, and for them to take delivery on all cattle within 14 days of purchase.
The bill is similar to one Iowa Senator Chuck Grassley, a Republican, introduced earlier this spring.
Representatives Cindy Axne, Abby Finkenauer and Dave Loebsack, all democrats, said that in their state, participation in the cash market is higher than the national average – often as high as 50 percent, but that in many other areas of the country as little as five percent of cattle are purchased on the spot market.
Nationally, it is estimated that about 20-25 percent of fat cattle are purchased on the cash market, with the remainder being contract agreements that are mostly based on the cash sales.
Iowa cattle feeder Eric Nelson said that with both senators and three of four representatives on board with the 50/14 issue, which is intended to provide for more transparent value discovery of finished cattle, it is clear that the Hawkeye state has been harmed by anti-competitive practices in the livestock industry.
“Go to any small town in Iowa and ask them if the small towns are more dynamic now than they were 25 years ago before the consolidation of the hog industry. They will laugh at you,” he said.
“Integration of livestock doesn’t bring more wealth to main street, it sucks it out.”
The 50/14 rule would hopefully slow the integration of the cattle industry, said Nelson, by mandating that at least half of all sales must be conducted in a bidding situation, not a private agreement. This action should provide more public information about cattle prices.
“I have a report that shows that in regions where there are more bidders for cattle, the prices are higher,” he said.
Nelson said that during the COVID-19 pandemic, independent feeders like himself and many others in Iowa have struggled to get bids for cattle. He said the packers have been slaughtering cattle procured through forward contracts, but are buying very few on the open market.
“In a normal year, they would buy a big chunk of cattle in this geography, but I only know of two feeders who have delivered cattle to Tyson in recent months,” he said.
“If something doesn’t happen, a bunch of guys like me will be done,” he said. If the remaining independent feeders are unable to remain profitable, price discovery will be essentially non-existent, he said.
Nelson, who once fed hogs, says cattle folks can learn from what that industry has been through.
“We don’t want an industry that is integrated like the hogs and poultry. When you get down to 10 percent negotiated trade, you don’t even know where the price is.”
Nelson said hog prices haven’t improved – in fact, according to a Pork Checkoff graph, hog prices were lower in 2016 than they were in 1984 – so hog producers are being forced to operate on tighter and tighter profit margins.
The cattle industry is headed that way if changes aren’t made quickly, he believes.
“We’re being so efficient, we’re losing equity to sell cattle. The reason we can sell hogs and even cattle so cheaply is that we’re losing equity. Is that efficient? We’re doing it for less money, but who is winning? It’s not the consumer and it’s not the people like me who are feeding them for a loss.”
R-CALF USA has voiced support for the 50/14 bills, and USCA commended Grassley for his bill in May. The Nebraska Cattlemen’s and Iowa Cattlemen’s Association were on board with Grassley’s bill. Regarding the house version, the Iowa Cattlemen said recent events have served to accentuate the need for a more equitable seat at the table for all producers.
“Iowa’s cattlemen know that true price discovery comes through competitive bidding and cash trade. The proposal outlined in this bill will help return some much-needed leverage to independent cattle producers in Iowa, and across the nation. The Iowa Cattlemen’s Association sincerely appreciates Congresswoman Axne, Congresswoman Finkenauer, and Congressman Loebsack for their leadership and willingness to engage on this important issue,” said Iowa Cattlemen Association President Richard Godfrey.
Axne, the main bill sponsor, said leveling the playing field for Iowa cattle producers is crucial.
“We’ve seen significant market disruptions from the Holcomb plant fire last year or more recently from COVID-19 that illustrate the need for this legislation,” said Rep. Axne. “This is not a new problem that Iowa cattlemen have been facing. With nationwide decreases in cash trades, Iowans have been bearing the burden of price discovery for the rest of the cattle industry … these reforms will help establish a fair and transparent market for all independent producers.”
NCBA voiced concern for Grassley’s bill.
“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,” said NCBA Policy Division Chair Todd Wilkinson, South Dakota.
Kansas Senator Pat Roberts who serves as the chairman of the Senate Ag Committee, has not yet scheduled a hearing for Grassley’s bill which was introduced in May.
“The concern I hear from Iowa farmers the last couple months is that the coronavirus has put them on the edge of bankruptcy,” Grassley told rural reporters in June. “Beef producers are having trouble getting a bid on their cattle,” he added, in a Hagstrom story.
Grassley said Roberts is opposed to the bill, but Roberts did not respond to a request for comment by The Hagstrom Report.
“I am looking for every opportunity to get this done. These farmers are hurting,” Grassley said. “There is no reason this should be controversial at all. We’ve just got to get it moving.
One of Roberts’ key ag committee staffers, Chelsie Keys, is married to a JBS lobbyist and former NCBA lobbyist Chandler Keys
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