Opinion

Cornett: The Mandaters Move On

Ok. So the Mandater senators and Corey Booker are sticking by their guns, despite the pleas of NCBA and the Farm Bureau. They want USDA to “examine academic literature regarding minimum levels of negotiated transactions necessary to achieve robust price discovery,”* and then establish a plan to mandate a minimum level of cash trade of fed cattle.

Senator Chuck Grassley (R-IA) indicated in his weekly press conference that he expects committee hearings soon. So it’s on the road; in the sausage machine.

“Alas,” says me. ”I thought they might take that part out of an otherwise fine bill. I like the 14 day delivery (Though, I wonder how that’s going to play in the gathering switch to ‘just in case’ inventory system I keep meaning to write about.)** I like the transparency. There’s quite a bit of it and the more the better.”

But alas on the mandates. It’s not law yet. And the big support is regional. There is a lot of doubt from other states. I like all of these senators fine. I mean, they are obviously trying to do what their voters want them to do. That’s what a politician should do.*** (But I’m from Texas. State of perpetual presidential prospects. The only time our guys prick their ears at the mention of the “farm lobby” is when they thought they heard “pharm lobby.”)

I’ve talked to lots of folks about this the last few weeks. I just don’t see it helping the market. It isn’t the original bill, which would have required 50 percent cash trade, so it’s not the end of the world. Kind of down there with mCOOL, I’d say. But how is it going to help? Yes, we need a better method of price discovery. We need change. But what if that change involves, say, producer-packer partnerships? Or, producer-packer-retailer partnerships? Is this just locking us into a system that will basically forbid change for most of us?

I’ll tell you who this isn’t going to hurt. The big packers. Yes, the academic literature indicates contracts are a little more efficient for them but it’s not a whole lot. I’m told they’re basically neutral on the matter.

How would this have helped when covid shut down the packing plants? Who was going to hold out for more money in that situation, where it was first-come-first-slaughtered? The sweetheart dealers got first dibs, but how would it have helped if they had been in the sell frenzy too?

At some point in my foggy memory I called this a “phantom itch.” We know something itches, but we don’t know where to scratch. I’d rather see these well-meaning pols concentrate on making sure the big packers are competing fairly.

And I’ll tell you who it’s going to help: Big Feeders. They’ll still get their “sweetheart deals,” but they’ll be sweeter hearted.

Let’s run through this. You are Mr. Beyond-the-Horizon Feeders, Inc. You can deliver 5,000 head of cattle a week, finished to the packer’s specifications. All the packers want your cattle. I am that little feedlot about a half mile past the McGillicuty place. I need to get rid of 900 head once a year.

To whom will the packer offer the sweetheart deal? And how will he price it? Same as always: my deal plus a pretty penny. If the packer leaves me with low- or no-bids until I have to puke them, that price is a negotiated bid. If he buys cattle at a stockyard auction, that’s a negotiated bid. If he buys cattle 500 miles from the plants, that’s a negotiated bid. He buys them cheaper.

So, how will the big yards react? I don’t see anything that says the big feeders have to sell a certain percentage of their cattle on the spot market.**** I mean, the senators wouldn’t presume to interfere with how producers sell cattle. That would interfere with the free market. This just covers how packers buy cattle. I’m sure there’s a difference to parse but I haven’t parsed it.

I know that is how it is now. But please tell me how this will do anything other than make it more so? Please, tell me at scornett9163@yahoo.com.

And when I say “more so,” I mean it will give the big guys with the enviable contracts more advantage than they have now. They’ll demand a prettier penny over me than they do now and that will give them more pretty pennies to use in sourcing the prettier feeder cattle and make their cattle even prettier next turn.

So here’s how I see it: This is worse than mere political kabuki. These senator folk are locking into place the very system they profess to oppose.

And making it more difficult for me, that little guy, to get my own contract.****

*I believe we’ve visited about that “academic literature” before. The bulk of it says we’ve got all the cash trade we need. But that’s all done by PhD people. So. You know. Apparently more suspect than conjecture. But for what it’s worth, the latest one I’ve seen surmises, “While it may be able to achieve greater price discovery and market transparency, forcing the movement away from AMAs via regional mandatory minimums for negotiated purchases will result in lower cattle prices and higher wholesale and retail beef prices.” https://agrilifetoday.tamu.edu/2022/02/16/new-report-provides-assessment-of-proposed-senate-bill-for-cattle-industry/

**So, as I understand it, everybody who ran out of stuff during covid is rushing to change from “just in time” inventory control to ”just in case.” For us that means packers and purveyors are building lots of freezers so they have something to sell next time the packer help gets sick. (Or, say, unionizes and strikes a big plant.) That 14-day pickup might be easier for them that way. But it is also going to add costs—so look for the damnable farm-retail spread to spread a little wider. Remember, the more cost and value middlemen add, the wider the spread. Think $4 worth of leather equals $450 worth of Lucchese.

*** Like, when the polls were so in favor of invading Iraq. Or pulling out of Afghanistan. Or firing the police in Seattle. You know, democracy. What the people want at the moment.

****The bill does not mandate individual feeders sell cash, but it does sort of indicate they have some sort of moral responsibility to do so. The bill says “it is the sense of the Senate that all participants in the fed cattle market have a responsibility to contribute to sufficient levels of negotiated trade of fed cattle in all cattle feeding regions in order to achieve competitive bidding…” But does anybody else see the word “responsibility” here and think, “oh, you mean, like, ‘from each according to his abilities to each according to his needs?’”

*****Hmmm. Being all wishy until somebody says washy is better, I do suppose such a bill might, indeed, help some of those bidenbucks startup processors on the horizon. Smaller plants would be able to contract all the cattle they want. That should make them more efficient. Maybe make it easier to contract out the other end. Which might give them a leg up on sourcing the top end cattle and providing a reliable product to buyers and give the little producers a contract opportunity of their own. Hmmm. That would be good, wouldn’t it? Those start-ups may need every boost they can get. Ok. So now I like the mandates. At the moment.

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