Tester, Grassley Promote 50/14 Proposal

Feedlot steers ( UNL )

The U.S. Senate needs to act now to help prevent meat shortages, according to two farm-state Senators. In an opinion published Monday in USA Today, Montana Senator John Tester and Iowa Senator Chuck Grassley claim American farmers and ranchers face “a grave crisis, and it could hurt every family who buys meat at the grocery store.”

The threat, according to the senators, comes from the fact the beef processing industry “has become dangerously consolidated” as just four corporations control more than 80% of beef processing.

In May, Tester and Grassley introduced legislation, referred to as the 50/14 rule, that would require “large-scale meatpackers to increase the proportion of negotiable transactions that are cash, or ‘spot,’ to 50% of their total cattle purchases.”

That proposal, covering facilities that slaughter over 125,000 head of cattle each year, is intended to “improve the accuracy of formula pricing… and increase transparency for producers and feeders.”

In their USA Today opinion, Tester and Grassley wrote, “These corporate giants use their market share to drive down cash, or ‘spot,’ prices for cattle and then use those depressed prices to set formulas to buy cows from independent farmers, ranchers and feeders for dirt cheap, all while raising meat prices at the grocery store.”

While it is generally accepted the four large packing companies hold considerable market leverage over cattle feeders, they do not – as the senators suggest – set “meat prices” at retail grocery stores. Packers sell the beef to retailers in daily negotiated transactions reported by USDA as boxed beef cutout prices.

The senators, however, noted that the COVID-19 pandemic has “brought the industry to a crisis point” requiring the federal government to “act fast to stabilize the market.” If that doesn’t happen, Tester and Grassley warned that small and independent cattle producers “will go extinct,” and the result will be more consolidation, “higher prices at the grocery store, economic destruction in rural America, and a vertical food supply chain even more easily crippled by a single accident or disaster.”

Touting their 50/14 proposal, Tester and Grassley said passage wouldn’t solve the problem entirely, “but it will help will help to provide badly needed relief to folks who are being squeezed by imbalanced markets and corporate greed.”