The coronavirus crisis has “caused price discovery (in the cattle industry) to basically evaporate,” farmer, cattle feeder and NCBA president-elect Jerry Bohn, Pratt, Kan., told AgriTalk’s Chip Flory on Thursday. “We were barely in balance with supply and demand before the crisis, and now we’re backing these cattle up – we’re probably three to four weeks behind in marketing.”
Bohn admits the relationship between feedyards and packers is as stressed as it has ever been.
“There’s a lot of anxiety and anger about what's going on. This is the second black swan event in about seven or eight months after the Tyson fire,” Bohn said. “People are upset about the spread between boxed beef prices and cash fed cattle prices. Unfortunately, a lot of the bad ideas that have ever been born in the industry are showing up again.”
One idea gathering significant attention since COVID-19’s impact on cattle markets is a minimum percentage of cattle procured by packers each week be on a negotiated cash basis. Earlier this week Iowa Senator Charles Grassley and Montana Senator Jon Tester proposed a bill in the Senate that would mandate 50% of the cattle traded be on a negotiated cash basis with 14-day delivery. Bohn said NCBA does not support the idea of government mandates for the cattle markets.
“NCBA’s policy is that we believe it’s important to protect our members right to conduct and do business as they see fit that best meets the needs of their individual businesses,” he said. “And the bill Senator Grassley has proposed would mandate that many of our producers will have to change the way they're currently sell cattle. The question comes to mind is ‘what part of government's going to do that? Who's going to determine what's fair and what's legal and what's not? We believe that should be decided by the industry.”
Bohn said NCBA has a cattle marketing task force currently working on that issue. It’s not an easy issue to fix, “but we believe it should be an industry-led solution, not a government-mandated solution.”
In the mid- to late-1990s, Bohn said value-based marketing began to evolve. That was at a time when “beef demand was declining at a precipitous rate.”
Because of value-based marketing, Bohn says, “I believe that producers are now getting rewarded for the quality that they produce, and consumers are getting the kind of product that they want to buy. Beef demand is very good right now across the country and around the world. I think that’s a direct result of sending the proper signals back to the industry to produce the kind of cattle that produce the kind of beef that consumers want to buy.”
Regarding the concept of 30/14, or 30% negotiated sales with a 14-day delivery, Bohn said, “If it’s government mandated we’re not going to be in favor of that. Does there need to be more price discovery? I think we would all agree that's a problem that the industry must deal with, but, mandating how we do it and mandating that the government will be in charge – that’s just the wrong direction.”
Bohn said if the industry was forced to go to 50% cash trade, “there will be less money available to producers in the future, not more.”