Once we become sustainable with a living income, then we can work towards regenerative practices and cool things like soil health.
Returning to a local/regional carcass trade is more efficient, keeps money in the community, and delivers a better and safer product to the consumer.
The Cattle Price Discovery and Transparency Act will not restore competition but rather lock in the four-packer domination by preserving the packer’s ability to use captive supplies to control the market.
April 18, 2022
I wish that I could love the Cattle Price Discovery and Transparency Act but I just can’t. I rather like the part contributed by Senator Fisher that increases the reporting of the fed cattle market. The more information available for a cattle seller the better. But market reporting does not overcome the structural deficiencies of the fed cattle market.
“This Bill focuses on controlling the negotiated spot market, when the real problem is captive supplies, or if you prefer – Alternative Marketing Agreements.”
The rest of the Bill is supposed to improve price discovery. This latest iteration of what started as the 50/14 concept is complicated and bureaucratic. If I understand correctly, USDA will be directed to determine the minimum percentage of fed cattle to be purchased through the negotiated spot market in each of nine separate marketing regions. They are allowed two years to accomplish this task. The dominate packers will, eventually, be required to use the negotiated spot market to buy the number of cattle determined to be sufficient by USDA.
There is a lot that is wrong with this approach, and one is that it is heavily bureaucratic. It will require a regiment of USDA employees to make sure that the scheme is functioning as it is supposed to. As we all know, every branch of government that is supposed to regulate an industry, ends up with that agency captured. Enforcement will also depend upon future Presidents liking the scheme.
“Anyone can read the Packers and Stockyards Act and understand that all captive supplies should be considered illegal.”
This Bill focuses on controlling the negotiated spot market, when the real problem is captive supplies, or if you prefer – Alternative Marketing Agreements (AMAs). Granted, the two are related. The fewer cattle purchased on the negotiated spot market, the more that are committed through captive supply. The core problem is that this bill acquiesces to some level of captive supplies that is as yet to be determined by USDA. Anyone can read the Packers and Stockyards Act and understand that all captive supplies should be considered illegal.
The central problem is, therefore, that the Cattle Price Discovery and Transparency Act guarantees captive supplies. A recent economic study conducted by F. Garrido et. al. of Georgetown University, “Buyer Power in the Beef Packing Industry,” concludes: “… that a one percent increase (in) the fraction of cattle purchased under AMAs is associated with a 5.9% reduction in the cash market price.” How much AMAs (aka captive supplies) are we supposed to consider acceptable?
Another recent study, “Multi-Plant Coordination in the US Beef Packing Industry,” written by C. Pudenz and L. Schultz of Iowa State University, states that: “U.S. beef packers openly began employing multi-plant coordination during the last decade. … this leads to wider spreads between downstream beef prices and upstream fed cattle prices.” Their conclusion is that by using advanced information technology, the dominate packers are now able to coordinate their procurement practices across the multiple slaughter plants that they own. At times, by closing or slowing a plant in one area, allows them to lower the prices paid for fed cattle and, thereby, increase profits across their multiple plants. The paper does not speculate, but we can wonder if this same information technology allows packers to better coordinate their purchasing strategy with the competing firms.
“Have you ever wondered why the Main Street of your community is a ghost town, this is why.”
Clearly, something has changed in the cattle market. Captive supply levels were a problem ten or twenty years ago, but are a much greater problem today. According to USDA, the farmers share of the beef dollar has fallen from 44.3% in 2016 to 36.8% in 2021. That is a loss of 8.6 cents of every dollar spent on beef. In 1980, before the packing cartel gained control of the cattle market, the farmers share was 63%.
As we see, over the course of the domination by the big four packers, producers have lost a full one quarter of the value of the cattle we raise. Have you ever wondered why the Main Street of your community is a ghost town, this is why. We do not generate enough profits in ranching to support a vibrant prosperous rural community. The problem with the Cattle Price Discovery and Transparency Act is that while it may improve the confidence in the negotiated spot market to be used as a basis to settle the captive supply formula cattle, it does nothing to restore competition to a seriously dysfunctional industry.
Maybe some of you, who have been kind enough to read this far into this op/ed, are tired of me beating the same drum, but the solution is staring us in the face. We have only to do what they did in 1921. The Consent Decree stemming from the passage of the Packers and Stockyards Act required that the Packer Cartel bid against each other in a competitive market that they did not own or control.
“The beauty of this approach is that it requires a minimum of USDA employees to make sure that the markets are honest …”
Therefore, once again, make the Packers bid against each other in a market in which: “producers and sellers in general have access and is designed to solicit more than one blind bid.” Maybe at first there will only be the four dominate packers competing in the market, but it will not take long for smaller packing concerns to understand that they are able to competitively buy fed cattle without being targeted by predatory practices. The beauty of this approach is that it requires a minimum of USDA employees to make sure that the markets are honest, because the entire system is owned and operated by private enterprise.
Some economists have been telling us that without the prevalence of captive supplies (aka AMAs) ranchers and feeders will not be compensated for producing quality cattle and the resulting beef will be rejected by consumers. As usual, these packer apologist economists have it completely backwards. Requiring that a base price be set at the time that packers and feeders enter into a formula forward contract does not prevent feeders from receiving a premium for carcass quality. In fact, it would promote the use of formula forward contracts. A competitive market price would be set when the contract is entered into, resulting in actual price discovery. Because the terms for the premium for quality would be built into the contract, producers would be compensated for that quality. Under this approach, there would be less need for a spot market to serve as the basis to settle contracts.
“He was confident that the Cattle Price Discovery and Transparency Act has real momentum. Too bad, because the concept is deeply flawed.”
A few weeks back I was in Washington DC and had a meeting with the legislative assistant for Senator Tester of Montana. He was confident that the Cattle Price Discovery and Transparency Act has real momentum. Too bad, because the concept is deeply flawed. I understand that livestock producers are desperate for Congress or the President do something – anything – and this Bill has the endorsement of a number of agricultural organizations.
Unfortunately, the Cattle Price Discovery and Transparency Act will not restore competition but rather lock in the four-packer domination by preserving the packer’s ability to use captive supplies to control the market. The only people besides the packers who will likely benefit are the Chicago Mercantile speculators who will have a better basis to settle their futures contracts. I would urge everyone to reconsider and offer an amendment that requires packers to buy all of their cattle in a transparent competitive forum. Problem solved!
Gilles Stockton
Grass Range, Montana
The world is running out of fresh water. The new documentary, DAY ZERO, is raising the alarm. The day when the water runs out is coming soon, especially to places like Colorado and the High Plains.
Humanity is rapidly consuming Earth’s fresh water supplies while removing nature’s ability to replenish them. Explore the journey to when Earth’s fresh water supplies will exhaust in service to modern comforts.
See trailer: DAY ZERO
The Arkansas and South Platte rivers that flow from the snow-packed Colorado Rockies to the High Plains of Eastern Colorado and Western Kansas are drying up. Growing cities like Colorado Springs and Denver are consuming more water, depleting two of the traditional sources of recharge for the Ogallala Aquifer. After transferring water north to a sprawling Colorado Springs, the Arkansas river is providing less and less water for growing food in the fertile fields of Southern Colorado, and barely, if at all, makes it to the Kansas border. At times, the South Platte water levels are nearly undetectable from an altitude of 8,500 feet at the Northeastern border of the state where the river once had a healthy flow into Nebraska.
“There was enough water to submerge the entire state of Colorado to a depth of forty-five feet, they called it the Ogallala Aquifer. Almost a third of the Ogallala water is already gone. Most of what’s left will disappear in the space of a lifetime.” –DAY ZERO
Over 130,000 head of cattle fill the Yuma County, Colorado feedlot, destined to JBS, the biggest meatpacker in the world.
“It’s not what the cattle are drinking, it’s what the crops are consuming in the production of corn and alfalfa hay.” – DAY ZERO
The precious Ogallala Aquifer water is free for the production of subsidized commodity crops that are sold at below cost of production prices to global corporations. When the water is gone, the companies will leave.
“The industrial model will fail because it’s not sustainable.” – DAY ZERO
When the water, the life blood of our existence, is gone, the big food corporations and promoters of urban sprawl will go somewhere else, leaving impoverished and hungry communities behind.
There are solutions
What if the extractive big food monopolies could be broken up, allowing rural economies to thrive, inviting people back from overcrowded urban areas to be part of a new healthier, more sustainable, and resilient food system.
What if safe pathways from the producer to consumer could be restored? What if smaller, safer, and more efficient local/regional meat processors, like we had fifty years ago, could return? Advantages of small rural slaughter plants, like Callicrate Cattle Company, include more efficient use of water, using and recycling thirty to fifty gallons per head, compared to over 700 gallons per head in the big plants.
Downsize, diversify, and sell direct – Feed People instead of corporations.
What if, given a fair share of the food dollar and living incomes, family farms and ranches could become the husbandmen and land stewards they were meant to be?
What if barley was a USDA program crop, encouraging more farmers to grow it? Livestock finish very well on barley, and like wheat, barley is typically a dry-land crop that doesn’t require aquifer depleting irrigation.
Ask President Biden and your elected officials to help lead the effort in building new and better local/regional food systems that will serve our existing and future generations.
Also see the 2009 article from the Scientific American: The Ogallala Aquifer: Saving a Vital U.S. Water Source
A-PLUS legislation allowing auction markets to invest in and/or own slaughter plants is a step backwards in local/regional food system development.
April 11, 2022
Gilles Stockton, President of Montana Cattlemen’s Association
It is not surprising that the National Cattlemen’s Beef Association (NCBA) is promoting another bad idea, but it is disheartening that the United States Cattlemen’s Association (USCA) and the Livestock Marketing Association (LMA) are going along with the Amplifying Processing of Livestock in the United States Act (A-PLUS). This Act, sponsored by Representatives Jimmy Panetta and Vicky Hartzier, would allow livestock market owners to invest in, and/or own packing plants, which is an obvious conflict of interest. Who will the auction market work for – you or the owner?
The genius of the Packers and Stockyards Act (P&S Act) is that it prohibited packing firms from owning cattle markets and stockyard owners from owning packing plants. In the days before 1921, the five dominate packers owned the railroad loading yards, the livestock cars, and the terminal market places. This ownership of the vital market infrastructure allowed for the packers to have an unpriced captive supply. Once a livestock producer committed their cattle or hogs to a packer, they were captive to whatever that packer decided to pay.
“An independent start-up packer, even one as large as the A-PLUS Act envisions, will not be able to get their product in front of the consumers.”
Rather than break up the packer cartel, the lawmakers in 1921 relied on free enterprise to restore a fair and competitive market. They did this by requiring that the packers divest of the market infrastructure that they owned and controlled – the rail yards, the livestock cars, and the terminal markets. The packers were obligated to buy cattle and hogs at independent auction markets. This allowed for smaller regional packing concerns to competitively bid for cattle and hogs. And it worked, because by the 1970s the four largest packers controlled only a quarter of the market.
Our current market problems began in the 1980s when our government arbitrarily changed the policy and essentially negated any antitrust enforcement. This included enforcing the P&S Act. Since 1980, the dominate packers merged with one another and quickly came to monopolize the cattle and hog industries. At the same time, the growth and consolidation of supermarket chains conspired to eliminate smaller regional packers. The Supermarkets preferred to buy through the centralized national system that the packer cartel provided.
“The solution is to restore the requirement that packers purchase in a market forum that they do not own and control.”
Over the past forty years, packers stopped using the public market in favor of captive supply arrangements where the cattle are not priced until delivery. The final price for most cattle and all hogs is now based on a very thin spot market. If a cattle feeder does not commit to this captive supply arrangement, they risk not having their cattle processed in a timely manner. The solution is to restore the requirement that packers purchase in a market forum that they do not own and control. The A-PLUS proposal goes in the exact wrong direction.
It is hard to know just who is pushing this crazy bad bill but it is obviously being advanced for the benefit of just a few, not independent livestock producers. The press release from the NCBA announcing the A-PLUS Act pretends that it is a matter of principal, helping to promote more packing capacity. A more likely possibility, is that certain parties are looking to cash in on the $500 million stimulus program earmarked for building moderate sized packing plants. This is certainly what happened with the Trump Administration’s stimulus plan, where big corporations and grifters got away with truckloads of money.
“The probable outcome of this whole scheme is that after these independent packers go out of business; the big packers will be able to buy brand new state of the art slaughter facilities for pennies on the dollar.”
The claim that the intention of A-PLUSE is to build small facilities is ludicrous. This bill allows for investment in or construction of packing plants capable of processing 2000 head per day or 700,000 per year. This is not small. A plant that size would process 2.5% of the total annual steer and heifer slaughter or 10.5% of the total cull, bull, and dairy cow slaughter. There is nothing modest about a plant that large.
What the Biden Administration apparently has not consider in proposing to use taxpayer’s money to subsidize the building of moderate size packing facilities, is how will these new concerns market the meat? The existing packer cartel has all the supermarket meat cases obligated to themselves. An independent start-up packer, even one as large as the A-PLUS Act envisions, will not be able to get their product in front of the consumers.
This is assuming that these new packing plants can even buy fed cattle at a competitive price out from under the packer cartel. The probable outcome of this whole scheme is that after these independent packers go out of business; the big packers will be able to buy brand new state of the art slaughter facilities for pennies on the dollar. Perhaps this is what the parties who are pushing the A-PLUS Bill are planning all along.
The A-PLUS Act is clearly a terrible idea. It moves the industry in the exact opposite direction than what is needed. If independent cattle ranchers and feeders are to survive, we need Congress and the Administration to restore competition. The way to do this is to do what was done in 1921 – require that the packers actually bid for their cattle in an open, competitive, and transparent market.
If you agree that the A-PLUS Act is a failure, call Representative Jimmy Panetta (202 225-2861) and Representative Vicky Hartzier (202 225-2876) and give them a piece of your mind.
Gilles Stockton
Grass Range, Montana
At the Great Bend Farm show – Standing up for rural prosperity – Brian Hale, Darren Dale, James Fenoglio, Steve Stratford, Mike Callicrate, and Justin Harris
Thanks to show organizer, Darren Dale, for the invitation to present at the Great Bend Farm Show. It was a pleasure presenting with fellow Kansan Steve Stratford. Steve is a welcome voice of reason and truth, and powerful defender of fair cattle markets.
On the 250-mile drive from St. Francis to Great Bend, I was reminded of the amazing wealth creation capacity of Kansas, but also of how little of the wealth stays in the state. Across Western Kansas, the big corporate feedlots were full, while the lower cost, more efficient farmer feeder lots were empty or abandoned. Three Dollar stores — yes, three — were open for business across the road from the motel in Hoisington, while franchise and retail chain stores lined the east-west thoroughfare through Great Bend. Like the coal mining towns of Appalachia, Kansas creates the wealth, but keeps very little. How insulting is it for the farmers, ranchers, and workers of rural America, after seeing their communities decimated by corporate extraction, to be left with only Dollar stores hawking the leftovers of the wealth they created?
Following are the slides from my presentation at Great Bend.
Great Bend April 9, 2022Click on arrows in lower left corner of image to advance slides.
“The money and political power of Wall Street has stolen America’s food system, bankrupted our farmers and ranchers, mined our soils, polluted our environment, wasted our precious water, and left us with expensive industrially produced food that makes us sick.” – Occupy Wall Street Food Day, December 2011
Industrial Agriculture and Urban Sprawl – A model of growth that’s made to fail.
Ranching Reboot Episode 4, Mike Callicrate “It’s time for a third revolution against monopolies”
Above: Ranching Reboot – Episode 4 – Mike Callicrate, owner of Ranch Foods Direct, sat down with us to talk about all manner of things from cattle markets, to public food spaces, the Bander, his feedlot and the pathway he built to market.
He shares valuable lessons learned from fighting against the commodity production system and how he’s built his own pathway to the consumer.
We talk about small community slaughter plants and public meat spaces and what that could look like going in to the future. We discuss environmental challenges, the food police and what it means when a Dollar General comes to town.
