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Editorial: Restore fairness and transparency to the cattle market

Editorial: Restore fairness and transparency to the cattle market

Agriculture towers as an economic engine in Nebraska, and cattle production accounts for the largest share of the state’s ag value. Nebraska is home to more than 20,000 breeding and feeding operations, most family-owned. The health of many communities across the state depends in considerable measure on the health of the cattle sector.

Of late, that sector has faced hard times. The share of the retail beef dollar going to producers has shrunk significantly. World-Herald reporting by Henry Cordes and Paul Hammel has been examining the details. In 2014, producers’ average portion of the retail beef price was a 55% share. Now, that share has fallen to 37%. Meanwhile, the packers’ share has gone from less than 1% in 2014 to 22% now.

Yes, one of the enduring fundamentals of agriculture is its cyclical nature. It’s true, also, that some short-term events have caused major disruptions: a 2019 fire that shut down a major Kansas packing plant; COVID-related shutdowns in 2020; a ransomware attack this year against mega-packer JBS.

But none of that erases the fact that the cattle market isn’t operating fairly, and that is the central problem to be addressed. It’s in the interest not only of cattle producers but of the general public itself that the market operate fairly, transparently and efficiently. Otherwise the market can be subject to distortion and possible manipulation, harming producers and consumers alike.

That problem is seen already in regard to chicken processing: The Big Four packers have paid hundreds of millions in fines and civil penalties after allegedly conspiring to fix prices in that sector. Such collusive behavior in beef packing hasn’t been demonstrated at this point, though the federal Justice Department is investigating as part of broader antitrust action by the Biden administration.

How the retail beef dollar is split (copy)

The key concern for cattle producers is a lack of a transparency in pricing: Packers secure the vast majority of their cattle purchases through private agreements by which producers agree to deliver cattle on a certain day at a preset price. Such an arrangement has advantages: Producers have the certainty of a sale at an agreed-upon price, packers are better able to handle the large volume of beef they need, and the system provides a general incentive for a high level of beef quality.

But reliance on the agreements has major downsides. Packers have increased control of the cattle supply. Some large feedlot operators receive preferential treatment. And, above all, the system undermines competitive bidding, so producers are unable to determine what a fair price should be for their cattle. All the while, grocery prices for the American consumer continue to escalate.

In short, these conditions prevent the market from operating properly and deserve corrective action. Midlands lawmakers have constructive proposals in the U.S. Senate seeking to push the market away from this inefficiency and lack of openness.

Legislation by Sen. Chuck Grassley of Iowa, a farmer, would require that a minimum of 50% of a packer’s weekly volume of cattle be purchased through bidding on the cash market. Sen. Deb Fischer, whose family operates a Sandhills cattle operation, has introduced a proposal that the U.S. Department of Agriculture set transparent bidding thresholds that would vary among regions of the country.

Agriculture has always had its ups and downs, and that surely will remain the case in the future. But the current failures of market operation are needlessly harming Nebraska’s cattle sector and deserve far greater attention and action. Fair markets are in the best interest of everyone.

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