More time for the agricultural law: With the expansion of agricultural legislation there is an opportunity to improve the policy

Photo Courtesy: Chappell Feedlot uses ultrasound to determine how many days of feed an animal needs before harvest. This efficiency reduces feed costs and produces market-ready carcasses.

On November 15, the Senate voted to pass a House continuing resolution bill that included an extension of the 2018 farm bill.

The bill extends the agricultural law until September 2024.

Cory Hart, who runs a farm/ranch near Chaseley, North Dakota, with his sons Kyle and Kurt, said he hopes this extension will give the agricultural industry time to work on farm bill issues, including funding for updating and enforcing the Packers and Stockyards Act.

In the summer of 2023, Hart traveled to Washington, D.C. to meet with members of the Senate Ag Committee and USDA representatives to help them understand how packers can keep the market in check by using home-grown livestock they choose. Hart believes packers can temporarily depress the market even when industry signals point to a higher market. He advocated for enforcement of the Packers and Stockyards Act (and MCOOL, the OFF Act, and updates to the Cattle Contracts Library) to protect independent feed dealers and producers from price manipulation by packers.

Brett Kenzy, president of R-CALF USA, also hopes for corrections for the cattle market in the upcoming Farm Bill. “People say the system is broken. The system is not broken, it is rigged. If something is broken, it means there was an accident. “What happened was methodical and purposeful – the transfer of wealth from the producer to the multinationals,” Kenzy said.

“Producers have to get involved. The only way to see positive change is for ranchers to get involved. We are the ones doing the work. We have a say. We have to advocate for what works for us, otherwise we will be managed. We try to make a living and raise families, and the byproduct of our success is feeding a hungry nation. It will never be easy, but it is possible,” he said.

Kenzy believes the farm bill needs updates to the Packers and Stockyards Act as well as other issues like country of origin labeling and checkoff reform.

“The market has to work. If the market doesn't provide the money for the producers, then it's the people who do. I trust a truly competitive market more than government or industry to provide these funds,” he said.

Andy Green, the U.S. Department of Agriculture's senior adviser for fair and competitive markets, said he and his team are working to improve the Packers and Stockyards Act, its recent measures to ensure transparency of poultry farming contracts and another rule in the works to prevent Discrimination applies to all animal owners.

In addition, his office helped establish the Pilot Cattle Contract Library, which has been in effect since January of this year.

Now they are focusing on a follow-up to the poultry rule and another rule that would “more clearly address the question of unfair practices and harm to competition,” he said.

He hopes these rules can be proposed and open for comment in the coming months.

Green said his staff was cut by 40 percent between 2010 and 2020 due to budget freezes.

“We have a big agenda and a small team. We have issued a rule on transparency for poultry and the library of cattle contracts,” he said. “We appreciate the goodwill of people on the outside in making sure we have the resources we need,” he said.

Hart, who regularly markets finished cattle to the major meat packers, said he tends to sell his cattle through verbal contracts with the packers. He wants written contracts. Not only does he feel that this would protect him in the event a packer is unable or unwilling to pay for the cattle, but that it would also provide more accurate information for the library of livestock contracts he is dealing with a pilot project with the aim of providing information and prices for the marketing of live cattle (finished cattle).

Hart also hopes updates to the livestock contract library could be included in the farm bill. As it is, it's not very useful, he said.

Because the Cattle Contract Library does not reveal actual contracts, but rather is a compilation of data (x number of a particular type of cattle sold for x dollars in x region), it doesn't really deliver what the industry was hoping for – converting insights into actual sales contracts . At a recent meeting with the USDA, Hart was told that the packers had only reported actual contracts for the first few months and since then they would only report volumes and prices. Hart says, “That leaves a lot to the imagination.”

USCA President and St. Onge Livestock Manager Justin Tupper agrees that the library of livestock contracts is not very functional in its current state.

“The devil is in the details,” he said. “As it is, it's pretty useless.”

“The confidentiality rule protects most those who are most in need of disclosure. They continue to use that as their crutch,” he said.

Additionally, Tupper said packers have learned to lower that “base price” through strategic cattle purchases, as many livestock sales contracts use the “five-state weighted average base price” as the basis for their negotiations.

“So many times a packer will buy a set of heifers knowing they are listed in the five-state weighted average. They make sure to purchase the livestock in an area where they know it will be reported. This is just crazy, they are using this to lower the weighted average of the five states. Everyone talks about making money off-grid, but if the base price was three to four dollars higher, we wouldn’t need the grid,” he said.

Tupper said the USCA even considered that Livestock Mandatory Reporting (sometimes referred to as mandatory price reporting) was now a hindrance to the cattle industry and was no longer the helpful tool it had intended.

Tupper, whose organization was meeting for its annual convention as of press time, said it is exploring possible CME reform. He believes that the insurance companies that sell livestock risk protection insurance have been using the CME to protect themselves and that this activity may have contributed to the market volatility in recent weeks. “Existing market signals and factors remain in place and have not changed, yet we have seen a 20 percent sell-off in the feeder cattle market,” he said.

Hart said the CME's expanded limits are “criminal.” They allow external interests to influence the market. “There is no fundamental reason for the wide swings in futures markets at certain times, which is not fair to the calf producer who wants to protect their bottom line,” he said. He expects producers will be even more reluctant than ever to use futures as a hedging tool due to the disconnect between the cash market and futures markets.

Hart is concerned that the Packers and Stockyards Act cannot determine whether packers have owned livestock for more than 14 days, which is illegal.

He points out that many feeder cattle, particularly those sold at auction markets, are often paid for by wire transfer, making it difficult to track who is buying the cattle.

He fears that the path to vertical integration will become more and more obvious in the future.

He said according to the USDA, 85,000 feedlots have exited the feed industry in the last 25 years, with 1,000 smaller feedlots exiting farmers/feeders in the last year alone. Fewer eaters mean fewer bidders for calves, Hart emphasizes.