NCBA Rolls Out Plan for Voluntary Cattle Market Price Discovery

Members of the National Cattlemen’s Beef Association have released their proposal to improve the beef industry’s price discovery process without mandating participation by producers or packers.

The report was produced by a working group of NCBA members and staff and calls for a regional approach and a so-called “75% plan” with participation and trade bench marks “for the industry to strive toward.” This approach, NCBA President Marty Smith noted in a letter to industry stakeholders Sunday, would “increase negotiated trade and incentivize each of the major packers’ participation in such negotiated trade.”

“In essence, the Subgroup will evaluate the weekly negotiated trade information for each of the USDA Agricultural Marketing Service’s cattle feeding reporting regions on a quarterly basis in arrears,” Smith notes. “Eventually, the Subgroup will include in its evaluation an analysis of packer participation data, but this information is not yet published under Livestock Mandatory Reporting.”

Smith also lays out several qualifications each region will need to achieve to avoid tripping price triggers:

-Achieve no less than 75% of the weekly negotiated trade volume that current academic literature indicates is necessary for “robust” price discovery in that specific region,

-Achieve this negotiated trade threshold no less than 75% of the reporting weeks in a quarter,

-Achieve no less than 75% of the weekly packer participation requirements, to be determined in short order, and assigned to each specific region,

-Achieve this packer participation threshold no less than 75% of the reporting weeks in a quarter.

NCBA is pursuing this voluntary approach in an effort to avoid a legislative or regulatory intervention, which has previously been suggested by other cattle groups and several lawmakers. However, Smith does note — as previously stated by NCBA officials — that should the voluntary approach suggested by NCBA fall short of achieving the price discovery sought by the industry, the organization would be willing to consider legislative solutions.

Specifically, Smith notes that if any of the previously listed triggers are tripped “in any two out of four rolling quarters,” NCBA’s subgroup will recommend the organization “pursue a legislative or regulatory solution to compel robust price discovery.”

The forming of an NCBA subgroup and their corresponding report was in response to two events with major reverberations in the beef cattle industry: a fire at a Tyson facility in Holcomb, Kan., and the coronavirus pandemic. Both events sent live cattle prices tumbling, but didn’t necessarily cause a corresponding drop in boxed beef prices.

Those two events led groups and lawmakers to reexamine the current framework of the cattle industry, including a USDA investigation that also produced legislative and regulatory options to address industry concerns. A corresponding Department of Justice probe is ongoing.

“While certainly not a silver-bullet solution, I truly believe that this approach provides the industry a goal to strive towards and, perhaps more importantly, a path forward if progress is not demonstrated toward that goal,” Smith said.

Source: NCBA