Q&A: TCFA's Ben Weinheimer's Southern Plains Perspective on the Cattle Price Discovery and Transparency Act
With the industry divided on the Cattle Price Discovery and Transparency Act legislation, perspectives range across regions of the U.S., including Iowa Cattlemen's Cora Fox.
Ben Weinheimer, president and CEO of the Texas Cattle Feeders Association provides his view of the bill and how it may impact his area producers.
Q: What part(s) of the Cattle Price Discovery and Transparency Act do you feel will be most beneficial to cattle producers?
A: Unfortunately, the proposed requirement of a government managed cash trade mandate is overshadowing and squelching constructive discussion on other elements of the bill that could have a positive impact. Several of those other proposals in the bill have support from all segments of the supply chain, such as implementing changes in Livestock Mandatory Reporting (LMR) or making other market reporting improvements that would presumably result in a corresponding improvement in market transparency and price discovery. Some of these include expedited carcass weights reporting, annual reporting of cutout yield and the establishment of cattle contract library (which from our perspective would logically occur sometime after USDA completes the 1½ year cattle contract library pilot program funded by Congress earlier this year).
Q: In Texas, what percentage of cattle are sold on negotiated trade vs. AMA?
A: As a result of voluntary, industry-led efforts by TCFA members during the timeframe from January 2021 through May 2022, negotiated trade in the TCFA region, which includes Texas, Oklahoma and New Mexico, averaged 13,215 head (13%) per week, including 7,208 head (7%) negotiated cash and 6,007 head (6%) negotiated grid. If the 13,000-plus head per week number looks familiar, it’s because Dr. Stephen Koontz at Colorado State University in 2020 and 2021 laid out research-based recommendations for the number of head of cattle per week that should be traded by negotiated means to help ensure robust price discovery. Those recommendations range from 6,000 head per week (minimum) to 13,000 head per week (robust) for our region. On average over the past 17 months, we have exceeded the recommended level for robust price discovery.
Q: Have these numbers changed in the past decade? If so, how?
A: Yes. During the previous decade of 2011-2020, negotiated trade in our region averaged 11,122 head (11%) per week, consisting of 7,292 head (7%) negotiated cash and 3,837 head (4%) negotiated grid. The lowest weekly average in a single year occurred in 2015, when we averaged 3,350 head (4%) per week, with 1,964 head (2%) negotiated cash and 1,386 head (2%) negotiated grid. In that timeframe, we were still suffering the consequences of a major drought and a large packing plant closure in our region. Negotiated trade levels were lower due to total cattle sales declining and we know that more cattle traded normally means more negotiated trades, too.
It is also interesting to look at the correlation, or lack thereof, between average weekly negotiated trade levels and fed cattle prices in our region. From 2011-2020, the average weekly fed cattle price was $124.77/cwt.; the 2015 average was $148.31/cwt.; and $126.55/cwt. in 2021-2022. It’s apparent there are a number of other external factors that influence the market beyond just weekly cash trade levels.
Q: Do you foresee any ‘unintended consequences’ to this bill? If so, what are they?
A: Some bad ideas never become good ideas. That’s true of so many situations where the government has been asked to “fix” an issue in the private sector. On the other hand, there are many examples where the private sector has made the necessary adjustments or corrections in response to economic signals, beef quality, beef safety, technologies and many other areas, which resulted in positive outcomes. In all those situations, the private sector – individuals and businesses – are afforded the opportunity to respond in an efficient, effective and timely manner in the absence of governmental constraints, limitations or mandates. The Cattle Price Discovery and Transparency Act would result in fewer marketing opportunities and less incentive for producers to invest in genetics and innovative production techniques that lead to higher-quality beef and the most efficient and productive beef production system in the world. This is a step backward and counters to the continuous improvement the cattle industry has been working toward to meet consumer demand.
Q: Do you have any reservations of getting the government involved in the beef industry to this extent (specifically with marketing beef)?
A: The list of examples of when the government has overturned or withdrawn a law, rule or regulation is so short that few come to mind. Perhaps the ill-conceived idea of mandatory country of origin labeling (mCOOL) is one such example. Yet, it took a decade to implement a course correction on mCOOL, but only after it cost U.S. cattle producers millions of dollars and the threat of Canada and Mexico implementing billion-dollar tariffs on our beef exports.
TCFA policy supports cattle producers’ rights to utilize any marketing option best suited for their business model to capture the highest value for their cattle feeding customers. Value-added is the mindset of our members and has been for decades, and those value-added market signals have successfully improved the quality of cattle and beef available to beef consumers in the U.S. and around the globe. To suggest that the proposed bill would only regulate how the packers purchase cattle is inaccurate. It would have a direct and immediate negative impact on cattle feeders, and ultimately cow-calf producers, and limit their freedom to operate and invest in genetics and technologies to maximize their returns and enable them to compete for consumer demand with other proteins.
Q: If you could add/change anything to this bill to better suit cattle producers, what would it be?
A: Unfortunately, there are many other issues negatively impacting cattle producers’ ability to operate: inflation, drought, labor, feed, trucking, climate, fuel, fertilizer, packing plant capacity and war, to name a few. Some members of Congress to no avail have spent years trying to force the government upon cattle producers’ marketing decisions. We encourage Congress to prioritize efforts to increase access to labor, expand packing plant capacity, provide disaster assistance to producers, promote domestic energy production, and explore realistic expectations for addressing climate change, given the long list of more pressing issues impacting producers today.
Q: After the recent hearings, do you feel the best interest of the independent cattle producer was voiced and heard in the presented testimonies?
A: Definitely. Shawn Tiffany, an independent feedyard owner/operator from Kansas, testified at the Senate Agriculture Committee in opposition to a government mandate. He testified it could potentially result in fewer marketing opportunities and less incentive for producers to invest in genetics and innovative production techniques that lead to higher-quality beef. A similar message was also delivered by National Cattlemen’s Beef Association (NCBA) President Don Schiefelbein. He urged House Agriculture Committee members to oppose government mandates and instead support key policies with broad, unified support across the entire cattle industry, including a cattle contract library, reauthorization of Livestock Mandatory Reporting (LMR) and investments in regional processing capacity expansion.
For two decades, economists have shown that alternate marketing agreements (AMAs) lower costs and increase efficiencies and have also pointed out that there is no evidence to indicate that mandating cash trade will improve prices in the fed cattle market or upstream to cow-calf producers.
Q: If not, what point of view do you feel was missed?
A: One aspect of this conversation that merits additional discussion is the significant increase in beef demand we have benefited from over the past few decades. Largely, this is due to cattle producers’ response to consumer demands for higher grading beef that provides a repeatable, high-quality eating experience. Restaurants, beef retailers and consumers have all received cattle producers’ value-added transformation that consistently delivers high-quality beef.
Q: If there is another hearing in the future, who would you recommend to testify?
A: Members of Congress have had the opportunity to hear from multiple subject matter experts on this topic over the past few years. In my opinion, all perspectives have been heard and the facts have not changed from the first hearing to the last. Therefore, we encourage Congress to set aside the controversial and divisive proposal of a government managed cash trade mandate and instead act on recommendations to improve market transparency and price discovery which have broad industry support.
Other Perspectives:
