Consolidation and Hook Space: Beef is taking center stage on Capitol Hill
Farm groups and packers addressed issues in the cattle markets, in a hearing on the beef supply chain. Now, the Senate Judiciary Committee is searching for answers.
The big four packing plants hold 85 percent of the market share for beef, leaving cattle producers and lawmakers questioning the competitiveness of the industry.
Sale Barn owner and Iowa Cattlemen’s Association President, Jon Shaben says that cash markets are suffering because packers utilize alternative marketing agreements.
According to Shaben, “All the alternative marking agreements that are contracted, and just like a simple supply and demand, when you have X amount of cattle that are contracted ahead of time, obviously that’s going to take away demand for the cash cattle market.. all those formula cattle are based off that market. So, how great it is-- it’s a great tool. I credit the packers for doing it [but] it’s not helping the cash market for producers.”
Neither JBS or Tyson would admit to the room exactly how much of their business is made up of AMA’s, but Shane Miller, Fresh Meats Group president for Tyson, said that it is over 50 percent.
He also pressed back saying that the negativity cast on AMA’s is not accurate, because they serve as a risk management tool for producers.
“We do contract with specific producers because they want to have a risk management program in place to allow them to minimize their risk, but also from a banking perspective too, that if they’re able to lock in a specific price on a forward contract, they can go back to their bank and say look I have my cattle sold off in the futures market at X,” Miller explains.
Tim Shellpepper, President of JBS USDA Fed Beef, told lawmakers the high price spread between packers and producers is a result of labor shortages.
“To operate our facilities safely, efficiently, and at capacity, we need a consistent and skilled workforce, and our base division alone, we are investing more than $150 million in annualized feed increases to attract and retain new words,” he states. “Today, average wages across our facilities are more than $22 an hour.”
When asked about solutions, National Farmers Union President, Rob Larew told the committee that better price reporting is needed, as well as greater antitrust review under the Packers and Stockyards Act.
“We are hearing a lot of conversation about supply and demand seasonality and the way markets fluctuate. All that is very much true, but what should not be happening is coordinated efforts in that space, dark markets, we need a lot more light brought into these markets for fairness, both in terms of the price but then also in terms of how the packers themselves are functioning as a unit,” Larew notes.
Packers currently submit cattle purchase information to USDA and while cash sale prices are made available twice daily, other types of sales are kept confidential. A practice Larew and Shaben say should be stopped, with the creation of a contract library by USDA.